Mortgage payments expected to fall with ECB rate announcement

Irish mortgage holders may be in for a welcome financial boost tomorrow.

European Central Bank officials meeting in Frankfurt are expected to reduce the benchmark interest rate below 1% for the first time in the bank’s history.

Much needed rate cut
Rate cut to provide financial boost for mortgage holders


A rate cut of 25 basis points (quarter percent) now seems increasingly likely.

Tracker mortgage holders will immediately benefit from the announcement. There are an estimated 400,000 tracker mortgage holders in Ireland.

Those with standard variable rate mortgages (of which there are an estimated 200,000) are also likely to benefit, although this will depend on the individual bank as not all banks passed on the last series of ECB rate cuts announced in November and December.

Ulster Bank was the worst of the major banks. It refused to pass along any of the November of December rate cuts (it later announced a separate spring rate cut) so it will be interesting this time around if it looks to appease customers with a rate cut as a goodwill gesture in light of their ongoing IT and account reconciliation problems.

Bank of Ireland and AIB alternated, passing on some or all of the rate reduction in November and December. EBS also passed on the rate reductions, but not the full amount in one of the months.

NIB had perhaps the worst possible timing. Not only did it refuse to pass on any of the rate cuts, but it also announced a massive rate hike for its standard variable rate customers at the same time.

KBC and Permanent TSB were the best of the lenders as both passed along the full value of the ECB rate cuts. However, Permanent TSB was making up for the series of awful rate hikes it had subjected its SVR customers to earlier. Permanent TSB had hiked interest rates by a massive 2.5% before being given State support.

Below is a breakout of the outcome of a 25 basis point cut.

Tracker 25bps decrease
Mortgage Amount Current Payment (2.00%) New Payment (1.75%) Decrease
€400,000 €1,478.48 €1,428.97 -€49.51
€300,000 €1,108.86 €1,071.73 -€37.13
€250,000 €924.05 €893.11 -€30.94
€200,000 €739.24 €714.49 -€24.75
€100,000 €369.63 €357.24 -€12.39
Based on 30-year term, ECB + 1%

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