MORTGAGE HOLDERS are set to save about € 60 a month after the European Central Bank (ECB) yesterday cut interest rates by half a percentage point to 3.25 per cent.
Almost all of the main Irish mortgage lenders have already confirmed that they will pass on the rate reduction to customers in full.
Borrowers with tracker and variable rate mortgages will see the cost of servicing a mortgage every month decline by about €30 for every €100,000 borrowed. However, the general economic outlook continued to dim yesterday as the International Monetary Fund (IMF) said the financial crisis would cause the world's rich economies to shrink for the first time since the second World War.
The Bank of England's monetary policy committee cited the "marked deterioration in the outlook" for the economy yesterday as it cut UK interest rates yesterday by 1.5 percentage points to their lowest level since 1955.
Sharply revising down growth forecasts it made just a month ago, the IMF said the financial crisis had proved to be deeper and broader than expected, affecting growth across the developing world as well as rich economies.
The IMF predicted global growth would slow to 2.2 per cent next year, down from its previous estimate of 3 per cent, with rich world economies contracting 0.3 per cent, against its former projection of a 0.5 per cent rise. The IMF admitted yesterday there had been a few signals of hope over the past week and that attempts to arrest the slump in confidence were beginning to have some effect. But the revisions in its forecasts came across the board.
Three themes dominated the worsening of sentiment since the fund released its last forecasts in October.
First, the financial crisis has continued to deepen in the rich world, with highly indebted economies such as the UK particularly vulnerable. Second, commodity prices have fallen, hurting oil exporters such as Russia and countries in sub-Saharan Africa that are dependent on selling raw materials abroad.
Finally, a general souring of sentiment has hit all emerging markets.
The two largest domestic banks, AIB and Bank of Ireland, are set to pass on the full 0.5 per cent ECB rate cut, with Bank of Ireland and its subsidiary ICS Building Society offering the cuts across its tracker and standard variable range of mortgages.
Those on a BOI variable mortgage with a loan to a value of less than 50 per cent will now see their interest rates fall to 4.5 per cent.
Permanent TSB, Halifax-Bank of Scotland (Ireland) and Ulster Bank will also pass on the lower rate for tracker and variable rate mortgages.
At First Active, those with a standard variable, a flexible or a tracker mortgage, will see the impact of the reduction from December 1st, while householders with an offset flexible mortgage will have their rate reduced from November 20th.
Members of EBS building society will see the benefit of the rate cut in their December repayments, with those on standard variable mortgage benefiting from a new rate of 4.88 per cent, while the societys tracker customers will also see their relevant rate fall by the full ECB cut.
National Irish Bank will pass on the full cut to its tracker customers from November 12th, while its variable rate mortgage customers will benefit from a reduced interest rate from December 1st.
Irish Nationwide Building Society said it would also pass on the rate cut from December 1st.
One lender, KBC Homeloans, still has to decide whether or not to pass on the interest rate cut.
The ECB's rates cut is the second windfall for variable rate mortgage holders in less than a month, following a reduction by the same amount on October 8th. - (additional reporting Financial Times service)
