Average repayments to fall by between €79 and €218

Holders of average mortgages will see their loan repayments drop by between €79 and €218 a month after the European Central Bank cut interest rates for a third time in three months today.

The European Central Bank (ECB) cut interest rates by 75 basis points this afternoon in its biggest ever cut as inflation plummets and the euro zone economy sinks into recession.

Borrowers who hold tracker mortgages will see their repayments fall automatically in line with the European Central Bank (ECB) rate cut of three-quarters of a percentage point.

Holders of standard variable-rate mortgages and personal loans will have to wait to see if their lender will pass on the rate cut or pockets the benefit by increasing the margins on their loans.

AIB and Bank of Scotland (Ireland) became the first two banks to confirm they will pass on the interest rate cut in full to all variable-rate customers.

Customers on fixed-rate mortgages do not benefit from a rate cut during the term of the fix.

Interest rate changes are usually passed on to tracker mortgage customers within five working days of the date at which the ECB rate change becomes effective.

Based on a home loan of €200,000 over 20 years, a tracker mortgage holder could expect their repayments to fall to €1,191, a drop of €79.

The cumulative impact of the three recent interest rate changes that has seen rates fall from 4.25 per cent to 2.5 per cent will see mortgage repayments drop €190 from a high of €1,381 in September.

This is based on a interest rate margin of 1.3 per cent on a tracker mortgage.

For the holder of a €300,000 mortgage over 30 years, today's change will see a reduction of €130 in monthly repayments to €1,398. This compares to repayments of €1,713 in September before the three rate cuts.

A borrower with a €500,000 mortgage over 30 years will see their repayments drop by €218 to €2,330. Three months ago the repayments on a loan of this size were €2,855, or €525 more.