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Tracker rates to remain low for two years

INTEREST rates in the eurozone will not rise for at least two years, in a move that will be a huge boost to thousands of tracker mortgage holders.

Markets have not priced in a rise until at least 2017, the head of global strategy at Standard Life said in Dublin yesterday.

Andrew Milligan, of Standard Life, said there was unlikely to be a rate rise by the European Central Bank (ECB) next year or the year after that.

There are 375,000 Irish people with tracker mortgages.


The interest rates on these home loans are directly linked to the ECB rate, which is at a record low of close to zero after two further cuts this year - in June and September.

The two cuts this year have meant annual savings of €240 in repayments on a €200,000 tracker mortgage.

The fall of the eurozone rate to just 0.05pc means that monthly payments on this mortgage are now around €665. Repayments will have come down by around €140 a month since 2011.

"The ECB is years away from raising interest rates. It will be 2017 before it gets near its target of 2pc for inflation," Mr Milligan said.

The prospect of core ECB lending rates remaining steady could give scope for some more cuts in variable mortgage rates.

AIB cut its variable rates by up to 0.25pc recently, but so far other banks have resisted moving their variable rates.

Some 320,000 homeowners are on variable rates, which are among the highest in the eurozone, with another 60,000 buy-to-let mortgage holders also on variable rates.

Variable rates in this country are around 2pc higher than in the rest of the eurozone.