MORTGAGE holders are in line for a boost after a string of economists predicted European Central Bank rate cuts from the start of next year.
More than 600,000 homeowners could benefit from a rate reduction that could come as soon as January.
The ECB is set to slash interest rates by a total of 0.5pc next year, reversing the two hikes it imposed this year, leading economist Dermot O'Leary of Goodbody Stockbrokers said.
A 0.5pc cut in rates would see a family with a €300,000 tracker having to pay €90 less a month. Over a year, this would work out at a saving of more than €1,000.
The likelihood of a rate cut was also endorsed yesterday by Ulster Bank, employers' body IBEC, economists at Barclays Capital in London and Britain's Capital Economics Ltd.
Weaker eurozone growth, falling inflation and uncertainty over the European debt crisis are set to combine to prompt a cut in lending rates, economists say.
There have been two ECB rate rises this year to take the eurozone rate from 1pc to 1.5pc. This has added around €60 to the monthly costs of repaying a €200,000 mortgage.
But this higher cost would be reversed if the ECB decided to lower rates.
Some 400,000 homeowners who have tracker mortgages would benefit directly. Tracker rates automatically change when the ECB rate changes.
Most of those who bought during the property boom -- between 2004 and 2008 -- took out tracker mortgages.
Another 200,000 people who have standard-variable rates would also be likely to benefit as lenders would come under pressure to pass on lower funding costs to borrowers.
Lenders have been hiking variable rates for almost two years, with the hikes imposed despite the ECB rate remaining unchanged for two years until the first rise in April this year.
Some lenders have variable rates approaching 6pc.
The Government has committed to force domestic banks to cut their costs enough to allow them to reduce variable rates by 0.25pc. But this has yet to happen, Karl Deeter of Irish Mortgage Brokers said.
This promise to force domestic lenders to cut variable rates would make it impossible for lenders to avoid passing on an ECB rate reduction, he said.
Any rate cuts would ease the hardship for those struggling to meet their mortgage repayments.
Some eight out of 10 mortgage holders are under pressure with their home loans.
This is made up of more than 55,000 people who are three months or more behind on their repayments and another 40,000 who have persuaded their lenders to modify their mortgages, but are not in arrears.
The governing council of the ECB is to meet on Thursday, when it is expected to confirm it has reversed its previous policy of hiking interest rates every three months.
Mr O'Leary said in a report: "Rate cuts are on the way in the eurozone.
"Ahead of next week's ECB meeting, we are changing our interest-rate forecasts. We now see the ECB cutting interest rates by 0.5pc, back to 1pc, in 2012, with the first reduction coming as early as as the first quarter of next year.
"We previously suspected that further interest-rate increases up to 2.25pc by the end of 2012 were likely."
Chief economist with Barclays Capital in London Julian Callow said: "The economic deterioration has become sufficiently rapid and alarming to warrant an immediate unwinding of the ECB's rate hikes."
Senior European economist at Capital Economics Jennifer McKeown said rate cuts were now on the cards.
"The chance of further interest-rate hikes has evaporated and a reversal of earlier increases now seems more likely."
But economists warned that any rate drop would be a double-edged sword as it would be a sure sign that growth had slowed in the eurozone.
With Ireland so dependent on exports to grow, a downturn in the eurozone and global economies may also impact growth here.
A typical homeowner with a €200,000 tracker mortgage has seen repayments rise by €60 a month this summer.
But much higher rises for variable-rate mortgage holders have meant that monthly repayments have shot up by €120 a month as almost all lenders have repeatedly raised rates this year and last.