Saturday 16 December 2017

ECB delays on rate cuts for homeowners

MORTGAGE holders will be left with the bitter taste of disappointment this week as the ECB holds interest rates for a second month in a row.

Struggling homeowners may now have to wait until March at the earliest before there is any further rate cut.

And it could be April or even May before another 0.25pc cut kicks in, experts predict.

The ECB cuts in November and December brought rates to the lowest level yet at 1pc.

Although further cuts were on the menu, the success of a €500bn eurozone bank funding measure has meant that a decision to cut rates has been put on hold.

Every reduction, no matter how slight, makes a significant difference to households with mortgages.

A 0.25pc reduction would automatically cut monthly repayments on a €200,000 tracker mortgage by €30 per month.

However, those who are on variable rates have to depend on their own bank and lender to pass on the rates.

The majority of lenders have only passed on a fraction of the cut so far.

A total of 250,000 homeowners are on variable rates.

Currently some variable rates are up to 3pc higher than tracker mortgages.


Meanwhile, markets are growing skittish again amid ongoing debt negotiations in Greece over a fresh austerity package.

The country failed to meet another deadline yesterday as it attempted to strike a deal to secure the €130bn rescue, pushing the debt-ridden nation closer to a default, which could threaten other eurozone nations.

And research has shown that eurozone household mortgage rates rose in December despite the European Central Bank's cut in official rates.

Rates on mortgages fixed for over 10 years, which account for about one-third of home loans, inched up to 3.95pc from 3.93pc a month earlier.

And separate research pointed out that eurozone banks are tightening lending conditions for both businesses and households, even as demand falls and the sovereign debt crisis drags on.

The European Central Bank's Lending Survey said that a quarter of banks expect to tighten the criteria that businesses must meet to take out loans in the first quarter of the year.

In the case of mortgage loans, as many as 29pc of banks said they had tightened conditions in the fourth quarter of 2011, up from 18pc in the preceding quarter and "higher than expected," the ECB said.


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