Boost for tracker mortgage holders as ECB cuts interest rates to record low of 0.15pc
TRACKER mortgage holders are in line for a summer boost after the European Central Bank delivered an expected rate cut today.
The Frankfurt-based bank delighted tracker holders when it dropped its key lending rate to just 0.15pc - a record low.
A family with a €200,000 mortgage will see their repayments fall by €10 a month, which works out at €125 over a year.
It is the seventh rate cut during the six-year squeeze on household incomes due to the financial collapse that started in 2008.
ECB boss Mario Draghi will explain the reasoning later today but the move is a bid to boost European growth and avoid prolonged deflation.
Some 375,000 homeowners here have trackers mortgages.
Every time the ECB cuts rates, tracker holders see the rate they pay go down. Their mortgage contracts state that they pay a set percentage, usually 1pc, over the ECB key lending rate.
ECB interest rates have come down from 4.5pc in July 2008 to 0.25pc at the moment.
Over the last six years it is estimated that tracker holders have saved around €6,000 a year due to the rate reductions.
However, some 200,000 people who have variable-type mortgages are not expected to benefit. One lender, Permanent TSB, recently hiked its variable rates.
And savings rates are set to continue to fall. Bank of Ireland has become the latest deposit take to cut its deposit rates, with some now as low as 0.05pc. And any interest paid is taxed at 41pc.
Tracker mortgage holders can save thousands of euro by sticking to their existing monthly payments, despite the latest interest rate cut, mortgage firms said today.
David Kelly, MD of HML Ireland, said that low interest rates provide an excellent opportunity for borrowers to pay down their loans faster and people should take advantage of this.
And Dr John McCartney, Economist and Director of Research at Savills Ireland added that the lower rate should help to underpin demand in the residential market.
The ECB also took its deposit rate below zero to 0.1.pc.