Most lenders to pass on 0.5% rate cut to customers

MOST LENDERS have said that they will pass on in full to mortgage customers the interest rate cut announced yesterday by the European Central Bank.

The cut of 0.5 per cent will result in a saving of €50 per month for the holders of a €200,000 mortgage over 20 years, (based on a tracker mortgage with a margin of 1.3 percentage points above the ECB rate).

However, one lender, National Irish Bank, has indicated that it may not pass on the full amount of any future cuts.

Another, Permanent TSB, said it would pass on the rate cut but this was based on wholesale money market rates coming into line with ECB rates.

Bank of Ireland and ICS Building Society said they would pass on the full interest rate reduction for all holders of tracker, standard variable rate and variable loan-to-value based mortgage products.

Ulster Bank said it would pass on the rate cut in full to holders of a tracker mortgage and standard variable rate. AIB said it would pass the cut on to its owner-occupier customers.

First Active, Bank of Scotland (Ireland) and Halifax all said they would pass on the full rate cut from February 1st.

Permanent TSB has also confirmed it will pass on the full cut in rates to existing mortgage customers. But a spokesman for the bank said the rate cut was being passed on in full because the real cost of bank borrowing on the interbank markets had come more into line with the ECB rate in recent weeks.

"We're passing on the reduction in full in the expectation that the interbank market will continue to operate close to the ECB rate," the spokesman added.

National Irish Bank said its tracker mortgage customers will benefit from the full 0.50 per cent reduction. The bank will pass on the full interest rate reduction to standard variable rate home loan mortgage customers.

However the bank warned it "sees little scope to pass on any future rate cuts to standard variable rate home loan mortgage customers given the requirement to balance the level of interest rates paid to deposit customers and the cost of market funding".

Isme, the Irish Small & Medium Enterprises association, warned the banks to pass on the full benefit to their SME customers, saying it was something they have failed to do to date. Isme said its research showed that some banks have increased their rates to their small business customers. It claimed Ulster Bank is now charging a rate of 11.95 per cent on overdrafts, 1 per cent more than a year ago.

"This profiteering, at a time when businesses are struggling to make ends meet, is criminal and must be stopped," said Isme