MORTGAGE BORROWERS will see their monthly loan repayments fall by about €50-€150 after a globally co-ordinated move by central banks to cut interest rates yesterday.
In a separate move yesterday, a draft of the Government's bank guarantee scheme was sent to the European Commission, the Central Bank and the Financial Regulator for approval, after it was approved by Ministers at a Cabinet meeting that lasted for 4½ hours.
The half-point rate cut by the European Central Bank (ECB), the Federal Reserve and the Bank of England failed to ease the turmoil in the banking sector.
Stock markets plunged again despite the move, which was designed to restore confidence in the world economy.
As uncertainty over the future of Irish banks continued, the Irish stock market fell 7.4 per cent, while stock markets across the world also continued to plummet.
A further interest rate cut may be made before the end of the year, economists predicted yesterday.
The ECB and the Bank of England are scheduled to hold an interest rate meeting on November 6th at which a further rate cut could be announced.
However, cuts could be announced before this date if the chaos in global financial markets continues to escalate.
The Federal Reserve, which is the US central bank, justified the rate cut by saying inflationary pressures had started to ease in a number of countries, partly reflecting the decline in oil and other commodity prices.
The Central Statistics Office (CSO) is due to publish an update on the Irish inflation rate today.
Borrowers who hold tracker mortgages will see their repayments fall automatically in line with the ECB rate cut, which becomes effective from next Wednesday, October 15th.
However, people who hold standard variable rate mortgages and personal loans will have to wait to see if their lender passes on the rate cut to customers 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 yesterday.
Several other financial institutions, including the three biggest mortgage lenders, Permanent TSB, the Ulster Bank group and Bank of Ireland, said they were reviewing the interest rates on their variable rate mortgages.
Customers on fixed rate mortgages will not benefit from the rate cut during the term of the fixed rate.
The co-ordinated move by central banks, which also included actions by the Bank of Canada and the Swedish Riksbank, is intended to spur economic growth.
"Decisive action such as this is exactly what is needed to help stem the slide in confidence globally in the operation of the financial and banking systems and the consequent risks to economic activity," said Simon Barry, economist at the Ulster Bank group.
"We think today's move marks the beginning of a cycle of rate cuts," he said.
This is the first cut in the key euro-zone rate since June 2003.
Stock markets had responded well earlier in the day to the UK government's announcement that it would offer a £50 billion liquidity lifeline to the major British retail banks, which include the parent banks of the Irish-based Ulster Bank group and Bank of Scotland (Ireland).
But the early bounce evaporated later in trading. Anglo Irish Bank led the sell-off in bank stocks, dropping 24 per cent, while Irish Life Permanent plunged 21 per cent. AIB fell 16 per cent, while Bank of Ireland dropped almost 9 per cent.