Boost for mortgage holders as ECB likely to cut rates
HOMEOWNERS are expected to receive a boost today with the European Central Bank expected to cut interest rates.
The move should see repayments for those on a typical tracker mortgage fall by around €360 over a full year.
Lenders will come under intense pressure to pass on the cut to variable-rate holders.
AIB is unlikely to pass it on, as it has the lowest variable rate in the market, at just under 3pc.
However, a move to cut rates is a clear indication that the eurozone economy is contracting.
And a reduction in the ECB rate is bad news for savers, who are already seeing deposit rates cut.
Steady inflation in the eurozone and a dire batch of economic performance indicators, including signs of weakness in eurozone powerhouse Germany, give the ECB cover to back up the EU summit deal with a 0.25pc cut in its benchmark rate to 0.75pc.
The ECB has never cut its main refinancing rate below 1pc but policymakers say there is nothing to stop it doing so and it may want to bolster flagging economic growth.
Some 400,000 tracker mortgage holders would benefit directly from a rate cut.
Each 0.25pc cut in ECB rates means monthly savings of €15 for every €100,000 borrowed.
This means that those with a €200,000 mortgage would save €360 a year from a new rate cut.
But in excess of 255,000 households who have the expensive variable mortgages will be at the mercy of their banks when it comes to passing on any rate cut.
A Reuters poll of economists showed the majority expected the ECB to cut its main rate to 0.75pc.
Meanwhile, there was a slight increase in consumer confidence in May. Sentiment rose as the Irish economy stabilises and the rest of Europe begins sharing some of the burdens of the euro crisis, according to the latest figures.