Mortgage-holders left waiting for rate cut

Most of the Republic's mortgage-holders will have to wait until next week to see how their monthly repayments will be affected by Thursday's European Central Bank (ECB) cut in interest rates.

Just two lenders took the plunge into rate reductions yesterday, with both limiting the move to one product in their range.

National Irish Bank (NIB) has cut its tracker mortgage rate from 4 per cent to 3.75 per cent in response to the ECB action. The move will benefit a quarter of the bank's home-loan customers.

A spokeswoman said NIB would be considering the remainder of its mortgage and savings rates on Monday, with changes likely to follow later in the week.

Ulster Bank meanwhile has reduced the rate applicable to its "flexible mortgage" customers from 3.75 per cent to 3.45 per cent. This will benefit customers holding loans of less than 60 per cent of their home's value. The bank will review other rates "early next week", according to a spokeswoman.

Seven out of the 11 institutions active in the Republic's mortgage market have yet to make any move on reducing the cost of borrowing for consumers. A spokesman for one lender predicted "a slow bicycle race".

A research note from Merrion Stockbrokers points out that Bank of Ireland, which reduced both mortgage and deposit rates soon after the ECB decision, appears to have raised its margin on mortgage products from 150 to 160 basis points.

"It is worth considering that this is the widest mortgage margin since 1999, when margins averaged over 200 basis points and prompted the entrance of Bank of Scotland into the Irish mortgage market," Merrion's analysts said.

The ECB reduced its key interest rate from 2.75 per cent to 2.5 per cent on Thursday, thus cutting the cost of borrowing for banks.

Bank of Ireland passed on part of the cut to mortgage customers but shaved the whole reduction off its deposit rate for special savings incentive accounts (SSIAs).

A number of other institutions offering SSIA interest rates linked to the ECB rate are likely to follow suit on the accounts next week.

Meanwhile, Hibernian has become the newest entrant to the Republic's mortgage market by linking with IIB Bank to offer Hibernian-branded home loans through its 30-strong retail branch network.