Borrowers benefit from Permanent TSB cut as European Central Bank slashes deposit rates
Borrowers are set to benefit from a new round of mortgage cuts from a leading lender.
Permanent TSB is cutting its three and five-year rates by up to 0.2pc for new customers.
The changes mean that the average first-time buyer borrowing €225,000 over 30 years would save almost €300 over a year by availing of the new five-year rate, according to Daragh Cassidy of price comparison site Bonkers.ie.
It comes as the European Central Bank (ECB) piled pressure on banks in the eurozone to lend more to home buyers.
The ECB moved to reduce the interest rate it pays to the banks that deposit money with it.
The central bank for the 19 countries that use the euro said it would cut the rate on deposits it takes from banks to minus 0.5 from minus 0.4.
That is described as a 'penalty rate' that pushes banks to lend excess cash. It is a way to force banks to lend out more instead of depositing money with the ECB.
Mortgage expert Karl Deeter said the ECB's move to effectively put more money into the eurozone financial system would make funding even cheaper for big investors.
"The ECB actions will attract even more foreign money into Ireland. First-time buyers will be up against a wall of money," he said.
The ECB also said it would purchase €20bn a month in government and corporate bonds for as long as necessary.
The purchases pump newly created money into the financial system, to lower borrowing costs and raise inflation.
The ECB's latest interest rate cuts will not provide any relief for homeowners, however.
It did not include a cut to the crucial official lending rate which most variable rate mortgages and all trackers are tied to.
There had been hopes that the ECB would take the radical route of implementing a cut in the lending rate, which would move it below zero. This would have reduced the monthly mortgage repayments for hundreds of thousands of Irish homeowners.
The ECB meeting was the second-last for the central bank's boss, Mario Draghi, eight years after he took the helm during a period of crisis for the single currency.
However it was the first monthly meeting for new Irish Central Bank Governor Gabriel Makhlouf who has begun his role after a move from New Zealand.