The ECB's decision to cut rates, and the prospect of more to come, is an early Christmas present for householders with tracker mortgages and some variable rate customers.
The interest rate cut will mean a savings of €45 a month for someone with a €300,000 loan, raising the prospect of savings of up to €150 a month if two more cuts are announced by next summer.
The first saving will be implemented within weeks following as a result of the European Central Bank’s decision to cut its interest rate by 0.25% to 1.25%.
The 0.25% interest rate cut typically brings savings of around €15 a month per €100,000 borrowed.
Frank Conway of Moneycoach.ie said the interest rate cut will help up to 80% of mortgage holders after Permanent TSB and KBC said it would pass the saving on to its customers on variable rates,
There are approximately 400,000 tracker mortgage holders in Ireland and an additional 200,000 on standard variable rate - both of whom should benefit.
The 400,000 home-owners on tracker mortgages will have the cut passed on within weeks and Permanent TSB and KBC's promise should be implemented before Christmas. Permanent TSB increased its rates earlier this year for those on variable mortgages even before the ECB interest rate hike in April.
Two weeks ago the financial regulator told banks to stop hiking their rates as this could add an even greater burden on the tax payer if the already-bailed out banks made mortgages so unaffordable people would hand back their keys.
Finance Minister Michael Noonan yesterday said banks the fresh rate cut to variable rate customers. He added two more cuts were expected within the next six months.
The ECB typically meets every quarter and changes its interest rate by 0.25% a time.
PTSB and KBC will cut variable rate
Permanent TSB has said it will pass the cut on in full to both its variable and tracker mortgage customers. It said the cuts would be effective from November 21, and would bring its standard variable rate to 5.44%.
KBC also said it would pass the cut on to its variable rate customers. "The bank is reducing its rates to customers notwithstanding the fact that the cost of funds on the retail deposit market and the wholesale market does not fully reflect the ECB reduction," it said. From December 1, KBC's standard variable rate will be 4.25%.
Bank of Ireland has yet to take a decision on whether to pass on the cut on to its variable mortgage customers.
AIB said its products and services, including mortgage rates, were under constant review, pointing out that it had not passed on the last two ECB rates rises to variable rate customers.
Ulster Bank says it has no plans to pass on the ECB rate cut to its variable rate mortgage customers, though a spokeswoman says all its mortgage products are under continual review.
EBS also said no final decision has been made about the impact, "if any", of the change on its standard variable mortgage rates.
Broker group PIBA said the rate cut was welcome, but called for a more aggressive cut, saying rates should come down to 0.5%, as in the UK.
The Irish Banking Federation welcomed the rate cut, but said mortgage interest rates were a matter for individual institutions "in a competitive environment".
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