Boost for mortgage holders as ECB cuts interest rates
THE EUROPEAN Central Bank has moved to boost economies in the struggling region by cutting interest rates to 1.25pc from 1.5pc in a surprise move.
While a rate cut was a possibility, the ECB is also concerned about inflation in the region which is well above the 2pc or lower level it prefers.
However, the European debt crisis has over-shadowed these concerns in the move at the first meeting of the European Central Bank under new president - Italian central banker Mario Draghi.
The move will be an immediate boost for thousands of Irish homeowners with tracker mortgages struggling to make repayments but others on variable rates will not be guaranteed the cuts.
The attention will now turn to the ECB press conference for more moves to boost the struggling eurozone economy.
The move surprised the markets and just four Bloomberg economists out of 55 had expected the cut.
It also came as the cost borrowing for Italy hit new highs today after the government didn’t go far enough in new reforms.
The yield on 10-year government bonds hit a peak of 6.402pc this morning – higher than the level last August which forced the European Central Bank to intervene and prop up the market.
It is getting closer to levels that could cause problems for Italy borrowing in the open market.
The Silvio Berlusconi-led government is under increasing pressure and last night introduced new reforms including the unblocking of billions in aid for the south of the country which is being propped up by the richer north.
In addition, the Bank of Italy was forced to announce the results of a stress test which it claimed showed that Italy could reduce its huge debt pile even if the bond rate went above 8pc.
Spanish bonds were also under pressure.