Mortgage rate cut boost for homeowners
ALMOST 375,000 homeowners on tracker mortgages are in line for major savings on their repayments thanks to a European rate cut.
The European Central Bank cut interest rates to a new record low yesterday to 0.25pc.
The decision to slash rates will cut €30 a month off an average €250,000 tracker mortgage but will also hurt savers who will get lower interest payments.
However, there may be a negative knock-on effect for those on variable rates as banks may be forced to raise the cost of lending to these borrowers.
The decision to cut, which was taken in Frankfurt, came as ECB officials worry about the slowdown in the European economy and very low inflation.
By cutting the cost of borrowing, officials hope that people will spend more which will boost economic output.
John McCartney, a director of research at estate agents Savills, said the cut would "be unambiguously beneficial for the Irish economy".
And he noted that property prices tend to rise when borrowing is cheap.
"In addition, it should cause the euro to weaken in the longer run, providing a stimulus to Irish exports in our key markets of America and the UK.
Ciaran Phelan from the Irish Brokers Association, also welcomed the decision. However, he said it was "unlikely" the banks would pass on the cut to struggling variable rate mortgage holders.
Meanwhile, as Ireland reaches an end to the bailout the Government will decide whether to take out an overdraft facility next month, Finance Minister Michael Noonan has said.
The Troika concluded its visit to Ireland ahead of the country officially exiting the bailout programme on December 15.
Troika sources have advised the Government to wait until the New Year to apply for a 'precautionary credit line' to ease transition.
However, Minister Noonan confirmed that a decision on this matter is imminent.
Taoiseach Enda Kenny hailed the end of the troika's final bailout review as "historic" and fuelled the speculation the State may end up leaving the bailout without the aid of a credit line.
Mr Noonan has been holding a series of international meetings involving the International Monetary Fund and European leaders to gauge whether Ireland should apply for a credit line.
"It's a free choice for the Irish Government which after today is fully sovereign again – we don't have the influence of the troika," he said.
The IMF said Ireland had achieved a lot in the programme, but that while banking had improved, much more needs to be done on problem mortgages.