Homeowners poised to get 0.5pc ECB interest rate cut on Thursday
UP to half a million homeowners could benefit from a cut of up to 0.5pc in European Central Bank (ECB) interest rates on Thursday.
Financial experts are expecting a cut of 0.25pc, but some economists now think there will be a reduction of up to 0.5pc.
A reduction of 0.5pc would mean monthly savings of €30 on every €100,000 borrowed for people with tracker mortgages.
Rates were cut last month in a move that saw repayments on a €300,000 tracker mortgage drop by €45 a month.
Money markets have now made heavy bets on a cut of 0.25pc to take the ECB rate to 1pc.
But market analysts have not ruled out an even bigger cut when the ECB governing council meets in two days.
Even if there is not a large cut on Thursday, the ECB is now likely to follow up with a second decrease in January, economists said.
Along with money markets, the view that interest rates are heading down has been supported by a poll of economists across Europe carried out by news agency Reuters.
Some 400,000 homeowners have tracker mortgages, which means they will automatically benefit from rate reductions. However, banks are not obliged to pass on rate cuts to those on variable rates.
A string of cuts in ECB rates is set to reignite the controversy over banks failing to cut variable rates.
Four lenders -- Ulster Bank, Bank of Ireland, National Irish Bank and Start Mortgages -- refused to pass on last month's rate cut.
Most lenders, representing around 100,000 mortgage holders, did pass on this month's ECB rate cut, including AIB, EBS, Permanent TSB, Irish Nationwide and KBC Bank.
Last week leading international think tank the Paris-based Organisation for Economic Cooperation and Development (OECD) said sharp rate reductions were needed to boost confidence and economic activity in the eurozone, which has entered a recession.
Aggressive rate cutting was necessary to counter rising unemployment and likely price drops in the 17 countries using the euro, the OECD said.
Lower rates and more intervention in markets by the European Central Bank could kick-start consumer spending and restore confidence to the crisis-hit eurozone.
The euro itself was in danger if the crisis was not contained, OECD heads warned.
They said the eurozone has already gone back into recession.
"There is a risk to the euro, let's not deny that," OECD chief economist Pier Carlo Padoan said last week.
To halt the slide into financial meltdown it threw its weight behind calls for the ECB to do more to end the crisis, before it's too late.
Now the expectation is that there will be a series of rate decreases.
Four cuts, including last month's one, would reduce repayments on a €200,000 tracker mortgage by €120 a month.
Over a year, a family with this size of mortgage would be €1,440 better off. This will go some way towards nullifying the €3.8bn tax and spending hits in the Budget.