It’s almost seven years since the European Central Bank (ECB) first introduced negative interest rates on cash deposits in the eurozone (countries which use the euro currency).

Negative interest rates are a fiscal policy tool designed to charge people for hoarding large amounts of cash and encourage them to spend it instead, which would boost the European economy.

In all the time that negative interest rates have been around, Irish banks have held back from charging negative interests on cash deposits or savings held by their customers, with the exception of large institutional or corporate customers.

However, the prospect of negative interest rates on ordinary savings and current accounts now looks a real prospect, especially with record levels of savings and cash deposits stowed away by Irish consumers over the past year.

Record deposits

According to the Central Bank of Ireland, Irish consumers had a record €125bn sitting in savings or deposit accounts at the end of 2020. The COVID-19 pandemic has been a major driver for increased savings in Irish bank accounts, with consumers spending far less than in a normal year.

Over the course of 2020, deposits in Irish bank accounts grew by a massive 13%.

With all the extra cash sitting in bank accounts and not being spent, it’s highly probable that Irish banks will move to negative interest rates on cash deposits very soon. Once banks start to charge consumers for holding cash deposits, it’s highly likely we will see consumers begin to spend or invest that cash to avoid negative interest charges.

A major investment or spending boom by Irish consumers in 2021 and beyond would help boost the Irish economy after a very difficult year but it has the potential to result in asset inflation across a number of sectors.

Cash-rich consumers are likely to drive up the price of houses in particular but could it also mean higher prices for agricultural land? Farmers are similar to every other Irish consumer, meaning there’s plenty of Irish farmers that have saved significant cash deposits over recent years.


This extra cash could be the difference for many farmers when it comes to bidding or not bidding on a piece of farmland that comes up for sale next door. With some cash in the bank, many farmers might feel they now have the buying power to acquire the neighbour’s field when it may not have been an option a year previous.

Additionally, negative interest rates could also drive investors and other business people with large cash deposits towards the Irish land market if they are looking for a secure asset to invest their money in.

It’s very difficult to tell what impact negative interest rates on cash deposits will have but the next few years in the Irish land market could be a sellers’ market if there are ample amounts of buyers out there sitting on hefty cash deposits that need to be redeployed elsewhere. Time will tell.