Yesterday the European Central Bank announced that it was cutting its main interest rate to a new low of 0.25%, leaving around 400,000 tracker mortgage holders celebrating an early Christmas present.
The ECB’s decision to cut their rate for the fifth time in the last two years means that anyone with a tracker mortgage will save around €15 per month for every €100,000 borrowed.
That will help ease the burden before next year’s property tax is collected, which could be before the end of the month depending on what method of payment is chosen.
While the savings for those on tracker mortgages is a plus though, you can only hope that those on standard variable rates aren’t made to suffer.
In the last two years, for instance, a person on a tracker mortgage with a loan of €300,000 has saved about €225 a month because of rate reductions, which is an annual saving of €2,700.
In that time standard rates have actually risen meaning that the gulf between those with trackers and those without is growing ever wider.
While no banks have ruled out passing the cut on, it is unlikely that any will, especially as there were hints yesterday that the rate may eventually drop even further in the New Year.
This is all having an effect on the market, of course. Those on standard rates are paying mortgages so high that they can’t afford to save for a deposit to move house while those on trackers are loathe to move in fear of losing their rate.
That effectively means that someone looking to upgrade to a bigger house, with something as simple as an extra bedroom, could – in theory – end up paying around €400-€500 a month extra if they were to sell their home, buy another and lose their tracker in the process.
That is an extreme example, of course, but one that is just not feasible for many people.
Yesterday’s news might be good for many but for others it won’t be.
Let us know your thoughts on it in the comments section below.