Surprise rate cut announced by ECB
Today’s surprise announcement by the European Central Bank that is will further reduce the base rate of lending from .15% to .05% will come as welcome news to the almost 400,000 residential tracker mortgage holders across Ireland.
Mario Draghi has major concerns about eurozone economies
“This surprise move will result in monthly mortgage repayments falling by about €10 on a €200,000 or €120 annually” said Mr. Frank Conway.
Standard Variable Rate mortgage holders are unlikely to benefit from the surprise rate cut as lenders can choose to not pass on ECB rate cuts to those customers.
Bad news for savers
The rate cut is bad news for savers as lenders are likely to further reduce deposit interest rates from their present lows.
“The news for savers is not so good. This is a market where many deposit institutions have already significantly reduced the level of interest they pay to, in some cases, fractions of a percent. On top of that, savers that do earn some interest income are liable for DIRT of 41%. Savers are now persona non grata” said Mr. Conway.
The end of the line.
Today’s interest rate cut beings the ECB base rate of lending to a new historic low.
“The ECB is sending a clear message that it wants to use up its more traditional tools in a desperate bid to stimulate the economies of Europe. Its next move may be in the form of non-traditional measures, such as quantitative easing as it seeks to get more credit to SME’s and homeowners” said Mr. Conway.
Families that will benefit from today’s interest rate cut should expect to have their mortgage repayments reduced by their lender within the next 4 weeks.