What does the rate cut mean for you?

Tracker customers will see immediate cut in repayments


The latest rate cut from the European Central Bank will mean different things to different people depending on what type of mortgage they have and when they took it out.

First the bad news. If you are on a fixed rate, the latest cut will not make a blind bit of difference to your repayments.

You might be slightly more hopeful if you are on a Standard Variable Rate but that hope is probably entirely misplaced as it seems entirely unlikely that any of the Irish banks will pass on the rate cut.

In fact the cut of 0.1 per cent may even prompt some of the meaner banks to increase their SVRs in order to offset the losses they are continuing to make on the Trackers.

Speaking of which, nearly 400,0000 people in Ireland, accounting for some 60 per cent of the total home loan market, are on precious tracker mortgages and will stand to gain - slightly - from the move by the ECB .

The monthly cost of servicing a €100,000 tracker mortgage will fall by about €6, so the average tracker mortgage holder with an outstanding loan of €300,000 will see monthly repayments fall by €18 .

While this saving may seem miserly it needs to be looked at in the context of the bigger picture. It is the sixth ECB rate reduction in the last two-and-a-half years which means that from next month a person with a tracker mortgage of €300,000 will pay about €243 a month less than they were paying in the autumn of 2011, an annual saving of €2,916. That’s a net figure and the gross worth of the six cuts is probably in excess of €6000 each year.

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