Pressure is increasing on the big banks to cut mortgage interest rates, following intervention on the issue by the Taoiseach, Mr Ahern. Yesterday three more lenders, including the Republic's biggest mortgage lender, Permanent TSB, cut mortgage interest rates by half a percentage point.
Mr Ahern said that while the Government could not force them to do so, financial institutions had a "moral obligation" to pass on the full interest rate reduction announced last week by the European Central Bank.
"They should do so quickly," he said, speaking on RTÉ.
Others who cut rates yesterday were National Irish Bank and ACC Bank. The three institutions followed IIB Bank in passing on the full reduction in European Central Bank interest rates. AIB and Bank of Ireland are expected to cut their rates, possibly as early as today.
Interest rates across Europe are now at the lowest level since the second World War. This rate-cut will reduce the monthly repayments on a €150,000 mortgage taken out over 20 years by €39. Repayments on a €200,000 mortgage will fall by around €52 per month.
NIB is the only financial institution so far to reduce also the interest rate paid to depositors, including customers who took out Special Savings Investment Accounts (SSIAs) with the bank.
The variable rate of interest paid to SSIA account holders has been cut from 2.75 per cent to 2 per cent, a quarter of a percentage point more than than the ECB rate-cut. NIB's rates had been higher than its competitors before this rate cut. All of the bank's other savings rates will fall by between 0.4 and 0.55 of a percentage point and will apply from Monday.
Those who opened variable-rate deposit-based SSIAs have seen the rates fall from 4.75 per cent to as little as 1.75 per cent before this cut. Some institutions could bring these rates as low as 1 per cent.
Banks and building societies have come under unprecedented pressure from the Government to immediately pass on savings to their customers.
Immediately after the ECB announced the 0.5 of a percentage point drop in its key interest rates to 2 per cent, Ms Harney warned financial institutions not to use the reduction to increase their own profits.
Customers who have variable rate mortgages with the four institutions that have announced lower rates will enjoy cheaper repayments from July. Lower deposit rates are expected to be announced in the weeks ahead.
The two big banks, AIB and Bank of Ireland, said they were continuing to monitor their interest rates yesterday. AIB has been most aggressive in the mortgage market, offering the lowest variable interest rate of 3.7 per cent. At this level the bank's mortgage rate was about a quarter of a percentage point below the others.
Permanent TSB's variable rate will fall to 3.55 per cent when the new rate applies. ACC Bank's will fall to 3.5 per cent while National Irish Bank's moves to 3.49 per cent. On Friday IIB Bank cut its rate to 3.45 per cent.
The Irish Financial Services Regulatory Authority has said it will continue to monitor the financial institutions, emphasising that it expects any cost savings to be passed on.