Christmas boost for homeowners as ECB makes surprise interest rate cut
MORTGAGE holders were given a pre-Christmas boost today after the European Central Bank announced a surprise cut in interest rates.
The rate was cut to 0.25pc – a new record low – from 0.5pc.
This will means a saving of about €30 a month for a mortgage holder with a €250,000 home loan.
There are about 375,000 tracker mortgages that will have their interest rates cut directly – however, those on variable rates will have if the cut is passed.
The last cut was in May of this year and the announcement was made by European Central Bank boss Mario Draghi in Franfurt today.
The move was a response to a slump in inflation way below the ECB target that has sparked fears the euro zone's economic recovery could stall.
The 23-man Governing Council had faced intense market scrutiny in the run-up to Thursday's decision after a shock slump in euro zone inflation to 0.7pc in October - far below the ECB target of just under 2pc.
Calls from government ministers and industry - the loudest from Italy - for the ECB to loosen policy to help bring down the euro's exchange rate had also heaped pressure on the Council, though few analysts expected a move this month.
The ECB cut its main refinancing rate to 0.25pc.
It held the deposit rate it pays on bank deposits at 0.0 percent and cut its marginal lending facility - or emergency borrowing rate - to 0.75pc from 1.00pc.
"Wow! This confirms how the ECB under Draghi has changed. They've become pretty pro-active," said ING economist Carsten Brzeski.
Speaking on RTE, Finanace Minister Michael Noonan welcomed the move.
“It helps our position,” he said.
“Interest rates rising and falling are always a policy instrument for countries.”
By Ailish O’Hora and Charlie Weston