Blow to mortgages as ECB hints rates won't fall
HARD-pressed homeowners face having to wait until next year for another mortgage cut after the European Central Bank yesterday hinted that it's likely to keep rates unchanged until 2013.
Rates have been at an all-time low of 1pc since last December, but some experts had expected the ECB to reduce rates even more to try to help Europe out of a deepening recession.
Yesterday, ECB president Mario Draghi said his powerful governing council -- which includes Irish central bank boss Patrick Honohan -- had discussed interest rates for the first time in four months.
But he said that they consider monetary policy to be "accommodative", the ECB's way of saying interest rates are where the central bankers think they should be.
In his monthly press briefing, Mr Draghi also revealed that the ECB now believes inflation is "likely" to stay above 2pc for the rest of the year before falling below 2pc "in early 2013".
The ECB's main aim is to keep inflation rates "close to but below" 2pc. Lower interest rates lead to higher inflation rates, so the central bankers typically don't cut interest rates unless they believe inflation will stay below 2pc.
This means that, if things stay as they are, it might be early 2013 before the next interest rate cut comes.
Mr Draghi stressed repeatedly the "prevailing uncertainty" about economic growth. This implies that if uncertainty leads to lower growth and lower inflation, interest rates may come sooner.
Yesterday's news will come as a particular blow to homeowners in struggling countries like Ireland and Spain, where protesters gathered close to the hotel where the ECB met in Barcelona.
Mr Draghi said he could "understand very well" the anger of those who were "young, poor and unemployed".
But he insisted that the actions taken to resolve the crisis were "the right ones" and would ultimately bear fruit.
The ECB has been pushing countries across the eurozone to pursue structural reforms that Mr Draghi believes will improve youth unemployment.
The Irish Brokers' Association called for banks to cut variable rates, even though there was no move from the ECB.
Ciaran Phelan of the IBA said: "The banks charging mortgage holders in excess of 4pc on Celtic Tiger-sized mortgages need to cut their rates as they are no longer tenable in today's economic climate."