Savers are counting the full cost of last week's interest rate cut by the European Central Bank (ECB), while lenders have extended their profit margins on mortgages.

Financial institutions passed on all of the 0.25 of a percentage point cut to savers, making it more difficult for people with money on deposit to avoid the eroding effects of inflation on the real value of their savings.

The ECB reduced its key interest rate from 2.75 per cent to 2.5 per cent last week, cutting the cost of borrowing for banks.

Bank of Ireland, one of the first institutions to pass on the cut, reduced the variable rate of interest paid to its 80,000 special savings incentive account (SSIA) holders by the full 0.25 of a percentage point, cutting the rate from 2.75 per cent to 2.5 per cent.

However, the bank reduced its standard variable mortgage rate from 4.24 per cent to 4.1 per cent, a drop of just 0.14 per cent.

AIB's variable rate SSIA is linked to the ECB rate and now stands at 2.5 per cent. The bank's standard variable rate mortgage fell by just 0.17 of a percentage point to 3.68 per cent.

ICS Building Society cut its rates yesterday from 4.2 per cent to 4.05 per cent, a drop of 0.15 per cent. National Irish Bank passed the full 0.25 of a percentage point on to mortgage customers, but cut the interest it pays to variable SSIA holders by twice as much. The SSIA variable rate fell from 3.25 per cent to 2.75 per cent.

Ulster Bank's flexible home mortgage, a tracker mortgage linked to the ECB rate, automatically fell to 3.45 per cent for customers with loans of less than 60 per cent of their home's value and to 3.65 per cent for customers with a higher loan-to-value.

Yesterday, EBS Building Society joined IIB and First Active in passing on the full 0.25 per cent cut to borrowers on a standard variable rate. Permanent TSB reduced rates by 0.25 per cent to new customers, but by 0.15 per cent to existing borrowers. As of yesterday, Bank of Scotland had yet to pass on any cuts.