The European Central Bank cut its benchmark interest rate by 50 basis points to 2 per cent this afternoon, matching its lowest-ever rate as inflation plummets and recession spreads.
The cut, in line with consensus forecasts, marks the fourth cut in just over three months amidst signs the financial crisis is biting hard into the real economy and inflation threatens to fall further below the ECB's 2 per cent ceiling.
It 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.
Most lenders have stated today that they will pass on the full interest rate cut to mortgage customers.
Bank of Ireland and ICS Building Society said today they would pass on the full interest rate reduction for all holders of a 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. First Active, Bank of Scotland (Ireland) and Halifax all said they would pass on the full rate from February 1st.
Permanent TSB has also confirmed it will pass on full cut in rates to existing mortgage customers.
The ECB also set new rates for its overnight facilities, after announcing in December it would increase the gap between these rates and the benchmark rate to back to 100 basis points.
From January 21st, funds borrowed from its marginal lending facility will attract an interest rate of 3 per cent and overnight deposits will pay 1 per cent.
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