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Further interest rate cut may be on the cards

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European Central Bank President Mario Draghi

European Central Bank President Mario Draghi

European Central Bank President Mario Draghi

THE prospect of a further cut in interest rates that would benefit tracker mortgage holders has been held open.

Economists are predicting there could be a new reduction in European Central Bank rates within the next two months.

Hints of a new cut came after the ECB left its key interest rate steady at the historic low of 0.25pc, despite a fall in inflation.

That decision meant no joy yesterday for 375,000 people who have tracker mortgages and see the cost of repayments fall every time the eurozone interest rate is reduced.

But ECB president Mario Draghi said the bank's key interest rate would stay at its current record low for a long time, and said it may even come down.

"We do not exclude further monetary policy easing – and we firmly reiterate that we continue to expect the ECB interest rates to remain at present or lower levels for an extended period of time," Mr Draghi said in Frankfurt yesterday.

"We will consider all instruments available to us. We are resolute in our determination to maintain a high degree of monetary accommodation and act swiftly if required," he said.

Economist with Goodbody Stockbrokers Dermot O'Leary said the ECB governing council had discussed cutting rates.

If the risk of deflation does not lessen, then a cut will be announced, he said.

"I think that the ECB will act at the next meeting or, more likely, at the June meeting."

Chairman of the Association of Expert Mortgage Advisers Trevor Grant said: "It is only a matter of time before the ECB reduces rates again if deflation in the eurozone continues."

BENEFIT

Mr Grant added that if the reduction does happen, the association would be calling on all lenders to reduce standard variable rates.

Director of research at property consultants Savills Ireland John McCartney said a new rate cut was likely.

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"It is now clear the ECB is concerned about low inflation."

Some 375,000 people with tracker mortgages benefit every time there is a eurozone cut.

The ECB surprised the markets when it reduced its core interest rate last November.

It meant a saving of about €30 a month for a mortgage holder with a €250,000 loan.

Expectations have been raised for a new cut after eurozone annual inflation fell back to 0.5pc in March, its lowest since the eurozone economy was deep in recession in 2009.


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