Mortgages won't come down after interest rates cut
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IRISH homeowners are not likely to get the next interest rate reduction from the European Central Bank.
The ECB is anticipated to cut its benchmark interest rate by up to a half a percent to a record low today, but Irish lenders look set not to pass it on.
Representatives from the Irish Mortgage Corporation were warning members that the ECB rate reduction would not come back to them.
Hiked
According to a recent survey conducted by Irish Mortgage Brokers, it was found that lenders have hiked their profit margins on standard variable mortgages by 1pc to 2.3pc over the past two years.
The research shows that in 2006 the average margin was 1.38pc, while in 2007 the average margin was 1.35pc.
And it is believed that banking institutions, which are not obliged to make the reductions, will decide to keep rates at the same level.
The Governing Council of ECB, which will meet in Frankfurt, will give consideration to the rate, having already lowered its key rate to 1.5pc from its level of 4.25pc in October last year.
Last month, following a 0.5pc cut, President Jean-Claude Trichet hinted at a further reduction, stating that the bank was looking at alternative measures to support the Eurozone economy.
The survey by Irish Mortgage Brokers suggested that if the rates drop again today, the fixed prices will probably reflect that, too.
Karl Deeter from the Irish Mortgage Brokers group surveyed variable rates going back to 2006 which rose in 2008, despite the ECB keeping its base rate unchanged.
"What we have seen is that variable rate margins have increased when the ECB rate was not even moving and banks basically leaned on variable rate customers to stem the outflow of money that was occurring, and still is," he said.
Significant
But homeowners on tracker mortgages are in line for significant mortgage reductions if the rate is slashed by the ECB.
Interest rates could be pushed down to a record low of 1pc and would reduce the repayments on a typical €300,000 mortgage by a further €80 a month, or a total saving of €550 in repayments since last September.
- Caroline Crawford
