Latest ECB rate cut is good news… but not for everyone

Latest ECB rate cut is good news… but not for everyone

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.

There are 5 comments for this article
  1. Annemarie Malone at 4:58 pm

    Dear Aisling,
    Your husband can easily get a job by doing jobs for cash for older people who need a small job done. I know of one job that I have asked three men to do, and I am still waiting.

  2. Dermot Murphy at 9:02 pm

    I think the banks should pass on this rate cut to standard variable accounts.

  3. padraig at 3:55 pm

    Variable rate mortgage holders are paying the price for the Banks bad poicy on trackers in the celtic tiger,as i do not see them passing on this rate cut to variable rate mortgages.

  4. Aisling at 1:27 pm

    Its so annoying!! We are on variable 4.5% paying €805 in interest a month when we could be paying€145 in interest a month on tracker. How can AIB justify over €650 difference in interest? Its crippling us. We have restructured our mortgage twice and another application gone in for which will hopefully be accepted in time before our mortgage goes back to full capital and interest. With only myself working and my husband unemployed the interest in unsustainable.

  5. Gerard Bannon at 12:59 pm

    Having struggled for the last 7 years to meet every payment on my fixed rate deals I’d like something back from the bank other than another slap in the face when my current fixed rate ends in March. What are the chances? I’ve always been conservative on this but is it worth continuing to fix?

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