ECB rates reach new low

HOMEOWNERS are in line for a seventh reduction in mortgage rates next month after they were cut to a new low yesterday.
But there was disappointment when the European Central Bank (ECB) cut was less than had been expected.
Most economists had been expecting a cut of 0.5pc, but the ECB delivered a 0.25pc reduction.
However, ECB president Jean-Claude Trichet said he did not rule out further rate cuts after he lowered the wholesale lending rate to an all-time low of 1.25pc.
Economists said it was likely eurozone rates would now fall by another 0.25pc in May. This was likely to be the last cut.
However, yesterday evening a number of banks had still not decided whether they would pass on the 0.25pc reduction to people with standard variable rate mortgages.
Ulster Bank, its sister bank First Active, and KBC (IIB) Homeloans have yet to indicate if their customers with variable rate mortgages will benefit from the latest reduction.
When interest rates were reduced by 0.5pc last month, Ulster Bank and First Active passed on just 0.25pc of the reduction to its variable rate customers. And National Irish Bank did not pass any of the March reduction.
But yesterday, National Irish Bank said it would be passing on this latest cut.
And Halifax/Bank of Scotland (Ireland), AIB, Permanent TSB, Bank of Ireland, Irish Nationwide and EBS Building Society all said they would be passing on the cut to owner-occupiers who have standard variable rate mortgages.
Tracker rate customers automatically get the rate reduction.
The reduction means homeowners will save €12 per €1,000 borrowed each month in repayments.
Someone with a €300,000 tracker, set at 1pc above the ECB rate, will save around €40 in monthly payments, and is now paying €580 less than they were last September.
For a family with a standard variable rate mortgage, that is set at 1.75pc above the ECB rate, the reduction on monthly repayments will be €33 on a €250,000 mortgage.
Since last October, this family will have seen their monthly repayments crash by €511, according to calculations by Frank Conway of Irish Mortgage Corporation.
Drop
And there was good news for first-time buyers when Bank of Ireland said its rate for these buyers will drop to 2.35pc from next Thursday. This rate is fixed for a year and is the cheapest mortgage for new buyers.
Chairman of the Consumers' Association James Doorley called on all banks to fully pass on this latest cut.
He said Finance Minister Brian Lenihan should force banks to pass on the cut.
The rate cut was designed to stimulate the economy, he said. Homeowers were already struggling with job losses, pay cuts and pay freezes, while many people dread Tuesday's Budget.
He added that the latest rate cut was of no use to people who were tied into fixed rate deals.
Another cut of 0.25pc in May would mean a family with a €250,000 tracker mortgage, which is 1pc above the ECB rate, will have seen monthly repayments fall by €456 since last summer.

Irish Independent
By Charlie Weston Personal Finance Editor
Friday April 03 2009