Many Irish tracker mortgage holders are set to see their annual mortgage repayments fall by close to €1,000 per year as a result of two separate interest rate cuts expected to be rolled out by the European Central Bank (ECB) in the coming days.
The ECB is widely expected to announce an interest-rate cut of 0.25 percentage points on Thursday that will bring its refinancing rate to 4 per cent.
That will see a typical tracker mortgage holder’s monthly repayments fall by €13 for every €100,000 they still owe. A borrower with an outstanding loan of €250,000 over a repayment period of 15 years is likely to see the cost of their mortgage fall by around €33 a month.
A second larger rate cut as a result of a technical change will lead to even bigger savings for people on trackers.
After an “operational framework review” carried out by the ECB in March, it is cutting the spread, or difference, between the bank’s refinancing and deposit rates to 0.15 per cent from 0.5 per cent.
That will mean the refinancing rate, on which tracker mortgages are based, will fall by 0.35 per cent from the middle of this month.
When the potential 0.25 per cent cut is added to the 0.35 per cent cut, the savings per €100,000 owed on a tracker with 15 years left to pay is €31, which will see a homeowner with a €250,000 mortgage outstanding better off by €77 per month or €924 per year.
[ What does the expected ECB interest rate cut mean for Irish mortgage holders?Opens in new window ]
AIB confirmed it would apply tracker mortgage rate adjustments in line with ECB policy and its contractual obligations to customers and stressed that it would “include applying the 0.35 per cent adjustment between the main refinancing rate and the deposit rate. We will write to our customers to confirm the rate adjustments on their tracker mortgages.”
While the savings are likely to be welcomed by tracker holders, the cohort are still paying considerably more than they were just over two years ago and even when the two cuts likely to be rolled out this month are added to a 0.25 per cent cut last June, monthly mortgage repayments will be about €400 more than they were in 2022,
When it comes to other mortgage holders, rates are unlikely to move significantly at least in the short term, according to Martina Hennessy of online mortgage brokers dodle.ie.
“We may see some lenders at the higher end of the market reduce their rates, and pillar banks making adjustments to remain competitive, [but] [t’s unlikely that rates will return to the low sub-2 per cent levels seen just over two years ago,” she said.
“For those who locked into fixed rates before 2022 and are now facing a very different rate environment, it’s crucial to seek market-based advice,” Hennessy said.
She warned that by accepting the first rate offered by a lender borrowers could end up paying substantially more over the lifetime of a loan.
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