Around 130,000 tracker mortgage customers in Ireland are set to benefit as the European Central Bank (ECB) announced its fourth rate cut since summer, reducing the lending rate it charges banks by 0.25 percentage points.
This decision comes after a series of 10 consecutive rate hikes, which ended in September last year. The move will result in lower monthly repayments for those on tracker mortgages, providing relief amid recent financial pressures.
Each 0.25 percentage-point reduction in the ECB’s refinancing rate lowers repayments by approximately €13 per month for every €100,000 owed. With the latest rate cut, mortgage repayments have fallen by €52 a month on every €100,000 since June.
New buyers may also gain as the lower ECB rates could encourage banks to reduce fixed and variable mortgage rates.
Economists believe this could make home financing more accessible. However, the benefits of reduced borrowing costs come with a caveat—economists warn that cheaper mortgages may contribute to rising property prices, which are already overvalued by up to 10 per cent, according to the Economic and Social Research Institute (ESRI).
Savers, on the other hand, face less favorable outcomes. Deposit takers are likely to lower the interest paid on savings accounts in response to the rate cut. This trend diminishes returns for those relying on savings for income, highlighting a downside of the ECB’s policy shift.