ECB cuts interest rates by 0.2%

The European Central Bank has delivered a boost to mortgage holders with a cut in its key interest rate by 0.25 percentage points to 4.25pc. This welcome news was widely anticipated and there may be many further reductions in the coming months.

The current reduction, which will see rates falling from a 22-year high and will be a big boost to tracker mortgage holders. There are 180,000 customers with ­tracker mortgages who will see €13 shaved off their monthly repayments from next month as a result of the ECB reduction, meaning a saving of €156 a year based on a homeowner couple with 15 years left to pay and €100,000 outstanding. Tracker holders are also in line for another 0.35 percentage points reduction in September when the ECB makes a technical adjustment to its rates.

Variable and fixed rates may not come down immediately because recent cuts in fixed and variables by AIB, Haven, EBS, Bank of Ireland, PTSB and Avant Money had already factored in today’s rate reduction. Some lenders will also argue that they did not pass on all the ECB rate rises when pricing new fixed rates and on variable rates.

There are two further 0.25 point cuts anticipated at the ECB’s September and December meetings later this year but this is dependent on inflation coming down to the ECB’s target of 2pc.

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