The president of the European Central Bank, Mario Draghi, hinted at a possible cut in May to interest rates following further instability in the Eurozone. The recent bailout of Cyprus as well as rumours that Slovenia could also follow suit in seeking financial aid increase the likelihood of another ECB cut to interest rates as a means to ease the burden on struggling mortgage holders – especially those on trackers.
If the ECB were to go ahead with a cut next month, it would bring down the interest rate from its already low level of 0.75% – the lowest it has ever been. And those on tracker mortgages would automatically have this interest rate cut passed onto them. A standard cut of 0.25% reduces monthly repayments by €15 for every €100,000 borrowed.
Such a move would be very welcome by some 375,000 households with tracker mortgages – all of whom will be in the process of receiving Revenue letters for the upcoming Property Tax which takes effect from June. While banks do not have to pass on any ECB cut to its variable mortgage holders, a fresh cut would put serious pressure on lenders to not proceed with increasing interest rates.
Prior to the ECB’s announcement, AIB recently talked of plans to increase the rate of interest it charges to variable mortgage holders later this year. Bank of Ireland has also stated that it too could hike rates soon. However, our lenders could be forced to rethink these plans should a cut go ahead next month.