Exactly how much Irish households will save per month with mortgage rates to be cut

The European Central Bank (ECB) is expected to cut rates this week in good news for Irish and European mortgage holders.

The cut may result in marginal savings for some while other households will miss out. Martina Hennessy, CEO of doddl.ie, has spoken out on the potential impacts on tracker mortgage holders and the broader mortgage market.

“The ECB refinance rate currently stands at 4.75% following a series of ten consecutive increases throughout 2022 and 2023, significantly affecting tracker mortgage holders,” said Hennessy.

“It is widely expected that the ECB will announce a 0.25% rate reduction this Thursday. This will offer some relief to tracker mortgage holders, resulting in a decrease in monthly repayments by just over €13 per month for every €100,000 outstanding over a 15-year term.

"While any reduction is welcome, tracker mortgage holders will be hoping that the same pace and scale they experienced with rate rises in the past two years will also be reflected in downward movements.”

Future ECB Rate Movements

“The ECB is set to remain cautious in its approach to reducing rates, continuing to monitor inflation closely,” said Hennessy.

“Further meetings of the European Monetary Policy Committee are scheduled for September and December, where they will review inflation data and the impact of the June reduction.”

Impact on Other Mortgage Rates

“Recent rate cuts by lenders have been influenced by reduced funding costs, with many already anticipating potential ECB rate cuts,” Hennessy noted.

“Current rates start from 3.45%, yet there is a significant disparity in the market, with the highest rates being double the lowest.

"We may see further decreases on individual rates, and non-bank lenders, who are lending at rates up to 7%, should start to reduce rates as funding costs decrease. Competition is key to ensuring there is discipline in the market and keeping rates low."

Homeowners Without Tracker Rates

“For homeowners who secured mortgages post-2008 without tracker rates, an ECB rate drop will not automatically result in decreased rates. Bank rates are influenced by their funding mix and the cost of acquiring funds to lend,” said Hennessy.

"The rate decreases we have seen over the last two months have already factored in anticipated ECB rate decreases. It is impossible to predict future rates accurately, but we are unlikely to see rates fall to the low levels experienced pre-2022.

"From 2016 to 2022, we experienced a period where rates dropped to sub 2% due to low bank funding costs. It would take extraordinary economic circumstances for rates to drop back to these levels in the near future."