The Director of Consumer Affairs, Ms Carmel Foley, has called on banks and building societies to immediately reduce mortgage interest rates for their customers.

Ms Foley told The Irish Times yesterday that there should be no delay in allowing their customers to benefit from the cut in European Central Bank rates. "I don't buy their argument that they have to protect savers by delaying or only partly passing on the lower ECB rate of interest. Savers don't have to suffer.

This will only happen if the financial institutions insist on maintaining their high profit margins.

She said consumers should expect a full 0.5 of a percentage point reduction in mortgage and other lending rates following the ECB's decision to reduce its key rate this week. Financial institutions were continuing to monitor their rates yesterday. AIB had signalled that it would reduce its rates yesterday but officials at the bank are meeting again on Monday to decide how to respond.

The financial sector was hit by a surprise levy in the Budget that will cost €300 million over the next three years. The banks are still assessing the impact this levy will have on their profitability with analysts suggesting it will reduce their annual earnings by 2-5 per cent.