Yesterday’s ECB rate cut of 0.25% will be welcome news to many mortgage holders but for a large proportion, they will never benefit from it.
Tracker mortgage holders will automatically benefit from the new 0.75% rate but the cut is unlikely to be passed on to the vast majority of variable mortgage rate customers.
The rate cut equates to an average saving of €15 a month per €100,000 borrowed.
However, as of right now Ulster Bank are the only lender who have said they will be passing on the cut to customers and you could be forgiven for thinking that that decision was made largely to gain some positive publicity given their recent difficulties.
AIB and EBS have already said they will not be passing it on while Permanent TSB, KBC Bank and Bank of Ireland’s silence on the matter means that it is unlikely they will follow Ulster Bank’s lead. (EDIT: On Friday afternoon Permanent TSB announced plans to cut their variable rate by 0.35%)
The unrest at the various banks’ decision not to pass on the cut to mortgage holders is likely to grow in the coming months with another cut of 0.25% expected soon.
The gap between what tracker and variable mortgage holders are paying is growing steadily and the big question is, is it fair?
According to today’s Irish Independent, the difference between what a tracker mortgage holder and a variable mortgage holder is currently paying is now more than €320 a month.
There are an estimated 400,000 tracker mortgage holders in Ireland, with 250,000 on variable rates.
There have been calls from opposition TDs for the government to intervene in the matter and perhaps now is time they did. We all know that banks are losing large amounts on trackers but is it right that variable rate mortgage holders should have to foot the bill for that?
After all, they are effectively paying for the same thing and not passing on the various cuts only defeats the purpose of what the European Central Bank is trying to do – stimulate the Eurozone economy. It is also not helping those who are struggling with arrears and for whom every cent counts.
Yesterday’s rate cut means tracker mortgage holders are now paying a rate of 1.75% but the average variable rate now stands at over double that amount at 4.2%.
That equates to variable mortgage rate customers repaying €3,840 more on a €250,000 mortgage than their neighbour who is on a tracker.
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