Lenders yet to decide on rate cut

Hundreds of thousands of homeowners on standard variable rates remain in the dark as to whether their lender will pass on yesterday’s European Central Bank (ECB) rate cut.

So far, just Permanent TSB and KBC have indicated their intention to cut variable rates in line with yesterday’s surprise 0.25 per cent reduction by the ECB.

However, two of the country's main mortgage providers, Bank of Ireland and Allied Irish Banks, today declined to indicate if they planned to follow suit.

A Bank of Ireland spokeswoman said a decision on the matter had not yet been taken, and declined to say when one would be made.

Allied Irish Banks said its variable lending rates were under “constant review”. A spokesman said the bank had not passed on ECB rate hikes earlier in the year, hinting that yesterday’s rate reduction may not be passed on to their customers.

Bank of Scotland said today it would pass on the ECB rate decrease to all variable rate customers "in full" to all Irish customers.

Ulster Bank has already said it had no plans to change its rate on the back of the ECB’s move.

Danske-owned National Irish Bank said while it would pass on the cut to tracker customers, its variable rates were not set according to the ECB's position because it sources its funds through Denmark, which is not in the euro zone.

Minister for Finance Michael Noonan and the Central Bank have urged lenders to pass on the reduction to mortgage holders, both to tracker customers and those holding variable rate contracts. Mr Noonan said yesterday he hoped the rate cut would be the first of three in the coming months.

The decrease in the ECB’s key interest rate will see the cost of a typical €250,000 tracker mortgage fall by roughly €32 per month.

Banks are obliged by contract to pass on rate cuts to tracker customers but maintain discretion over standard variable loans.

The cost of variable loans has risen significantly since the banking crash, with lenders citing the greater costs banks themselves face in sourcing funds.