The European Central Bank has cut its benchmark interest rate for a second month in succession today.
The bank reduced its base rate of 1.25 per cent by a quarter of a percentage point. The interest rate on the marginal lending facility will fall by 25 basis points to 1.75 per cent, and the rate on the deposit facility will drop to 0.25 per cent, with effect from December 14th.
The move means holders of the average-sized tracker mortgage of €300,000 will be better off by about €30 a month.
Banks must pass on the cuts to tracker mortgage holders, but are not obliged to pass any reductions on to standard variable rate mortgage holders. Two of the State’s largest lenders, Bank of Ireland and Ulster Bank, failed to pass on the last rate cut and AIB only did so after significant pressure was applied.
However, Permanent TSB today said it would be passing on the reduction to all mortgage customers, including those on standard variable rates and investors in residential properties.
In a statement, the bank said it would be cutting rates for some residential and investor customers by as much as 71 basis points.
This afternoon, AIB said its variable rate mortgages would remain unchanged. However, small businesses and personal customers will see their overdraft rates reduce by 0.6 per cent
The bank noted that its funding costs were no longer primarily determined by the ECB base rate.
"The capital provided by the state to AIB means we must do all that we can to help our customers and support economic revival, while protecting the taxpayers' investment," AIB chairman David Hodgkinson said.
EBS, which is now owned by AIB following a merger earlier this year, plans to reduce its rates, with variable rate mortgage customers benefitting from a cut of 0.35 per cent.
Bank of Ireland is reducing standard variable rates for residental customers by 0.15 per cent, and its LTV product range by 0.10 per cent. The changes also apply to its subsidiary ICS.
The Irish Small and Medium Enterprises Association (Isme) has demanded that the Government take firm action on lenders who do not pass on the cut.
Meanwhile, Bank of Ireland has said it has released a new mortgage fund of €1.5 billion in support of up to 10,000 homebuyers for 2012.
The bank said the new money would “act as a further support to the ministerial announcement in the budget to support first-time buyers in the market”.
