Further ECB interest rate cut expected in autumn
THOUSANDS of homeowners with tracker mortgages could be in line for an autumn boost with a new cut in European lending rates on the cards.
Some 375,000 mortgage holders have tracker rates that move in line with the European Central Bank main interest rate.
The ECB kept its main interest rates at a record low of 0.5pc yesterday, but economists now expect a new reduction in September or October.
And even if there is no new cut, it will be 2015 before eurozone rates rise again.
The decision to maintain the low rates means the holders of tracker mortgages will see their repayments remain at record low levels for another two years.
The continued low rates come as inflation remains low throughout the countries that use the single currency.
The cost of living is expected to rise by an average of 1.4pc this year, and 1.3pc next year – well below the 2pc target of the ECB.
ECB president Mario Draghi said that the 17-member eurozone was likely to see a mild economic recovery later this year.
But Dermot O'Leary, an economist with Goodbody Stockbrokers, said he expects the recession in the eurozone to continue over the coming months.
This will force the central bank to introduce a new cut in the autumn.
"I expect the recession to continue and a further reduction in the second half of the year would be justified on that basis," he said. KBC Bank economist Austin Hughes said that president of the ECB, Mario Draghi, and the governing council are reluctant to cut rates again.
But even if they do not reduce them again there is no fear of a rise until 2015, he said.
Last month's reduction in rates meant 375,000 homeowners here with trackers saw repayments cut.
The reduction in repayments on a €200,000 mortgage was €30 a month.
Over a year, this amounts to savings of €360 on repayments.
Half of the mortgages in the system are trackers.
But rather than pass this on to variable rate customers, hikes in variables for customers of EBS, AIB and Haven take effect from this week.
And last week Danske Bank said it was putting up its variable rate by up to 1pc. Its 4.95pc rate is now the highest in the market.
Other lenders have failed to pass on May's ECB cut to homeowners with variables.
Some 300,000 homeowners have variable rate mortgages.
Mr Draghi, speaking at a news conference after the ECB left its key interest rate at a record low of 0.5pc, said the central bank stood ready to act if the eurozone economy does not pick up soon.
He held open the door to a rate cut as one of the main ways to stimulate the eurozone economy, saying that the bank would "monitor" very closely how the economy is doing.