MORTGAGE interest rates are on course to hit a historic low next month as part of Europe's frantic battle to save the euro.
Another cut in interest rates in January is expected to follow yesterday's 0.25pc reduction and came as the ECB offered banks unlimited cash for three years in its drive to keep European lending institutions afloat.
Against the backdrop of the deepening crisis across the eurozone, Taoiseach Enda Kenny was also locked in a battle to get our bailout debt reduced in return for agreement to hold a referendum which would give more centralised powers to Europe.
These powers are seen as essential to enforce greater financial discipline on countries, such
as keeping their borrowing within agreed limits.
In a letter to EU Council president Herman Van Rompuy, Mr Kenny said he wanted to delay repayment of some debts for up to 30 years.
He wants agreement on the repayment of some of the €63bn borrowed by the state to fund the banks. Some of this was borrowed under the EU-IMF bailout and some on the bond markets.
Mr Kenny wants the new EU rescue fund to take over these debts. The Government would then hope to get a better deal on the repayment terms.
The deal being sought would make it easier to sell any referendum to voters.
The chances of a successful outcome to the EU summit looked more remote last night as positions hardened among the larger and smaller states.
Tanaiste Eamon Gilmore conceded for the first time that the Government would be prepared to hold a referendum on a new EU treaty.
Mr Gilmore said: "If that is what we have to do to save our currency, to restore our economy, to be able as a sovereign nation to borrow again on the financial markets and to ensure that no future government can ever again bring us to such a sorry state, then let us not be afraid to put that choice to the Irish people."
While ECB president Mario Draghi cut rates and provided cash for European banks, he dampened speculation that the ECB will buy any more government debt. Markets had been expecting the ECB to offer to buy unlimited government debt and this was seen as a crucial step. World markets fell after Mr Draghi made the comments.
On a day of intense and varied activity, the ECB cut its key interest rate by 0.25pc to 1pc -- the second time in two months.
The move will benefit more than 400,000 on tracker mortgages before Christmas, with a saving of almost €40 a month on a €250,000 mortgage. A similar cut in January -- predicted Goodbody Stockbrokers Dermot O'Leary -- will bring rates to the record low of 0.75pc.
However, not all the 200,000 homeowners on variable rates will see any benefit -- even though Mr Draghi said it was his "clear expectation" that banks use the cut to lower the cost of credit.
Ulster Bank last night refused to pass it on, while Bank of Ireland is only passing on part of the cut.
Mr Draghi refused to be drawn on whether banks should be "compelled" to pass on the cut. He said the ECB's governing council had a "lively" discussion about the cut, and the decision had not been unanimous.
The latest rate cut was complemented with a massive push from the ECB to ease the credit crunch sweeping through European banking markets.
The ECB will now offer banks loans for an unprecedented 36 months.
It is the second month in a row that Ulster Bank has refused to pass on an ECB cut.
AIB said it was not passing on the cut as it has one of the lowest rates in the market.
And KBC Bank said it was keeping its variable rates under review. But most others are passing on the cut.