Three further rate cuts on the way from ECB but will banks pass them on?

Three further rate cuts on the way from ECB but will banks pass them on?

It has emerged that three further interest-rate cuts are expected from the ECB in the coming months to follow on from the 0.25% cut delivered at the start of November.

However, it remains to be seen whether banks will pass the rate cuts on to their customers.

Analysts have said they are expecting a eurozone rate cut in December, another in January and added that a third in February or March was now highly likely.

This would take the ECB rate from 1.25% at present to 0.5%, according to economists at Danske Bank, which owns National Irish Bank.

Four cuts, including this month’s one, would reduce repayments on a €200,000 tracker mortgage by €120 a month.

Over a year, a family with this size of mortgage would be €1,440 better off.

Danske Bank said the ECB was likely to keep cutting rates in a bid to counteract disappointing growth in the eurozone and in an attempt to contain the sovereign-debt crisis.

A string of cuts in ECB rates is set to reignite the controversy over banks failing to cut variable rates.

The Irish Independent reports that a billionaire investor in Bank of Ireland, Wilbur Ross, has defended the bank’s decision to resist government attempts to persuade it to cut its variable mortgage rate.

The vulture capitalist said a more “normalised” funding environment was needed for Bank of Ireland to pass on ECB interest rate cuts to customers on variable-rate mortgages.

Mr Ross, who owns 9pc of Bank of Ireland, told Reuters news agency that the lender’s high funding costs made it difficult to pass on the ECB rate cut.

Ulster Bank has also rebuffed efforts by the Government to get it to pass on last week’s ECB cut to its variable rate customers. Its variable rate is 4.95pc, compared with Bank of Ireland’s 3.99pc.

The State owns 15pc of Bank of Ireland. It has no stake in Ulster Bank.

Meanwhile, Finance Minister Michael Noonan said on Tuesday that Financial Regulator Matthew Elderfield had told him that he does not need additional powers to force banks to pass on ECB interest rate reductions to customers.

Mr Noonan ruled out introducing emergency legislation to force two banks to pass on interest rate cuts to struggling help the mortgage holders.

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