A number of the State's financial institutions said today they would pass on the interest rate cuts announced by the European Central Bank (ECB) earlier this afternoon.
The ECB has cut interest rates by 50 basis points to 3.25 per cent amid the euro zone's sharply deteriorating economic outlook and easing inflation pressures. ECB President Jean-Claude Trichet has refused to rule out further cuts.
In a statement, Permanent Tsb - part of Irish Life & Permanent - confirmed it will pass on the full 0.5 per cent cut to its residential mortgage customers on both tracker and variable mortgages.
Bank of Ireland and ICS Building Society said they would pass on the cut to customers with standard variable rate and tracker mortgages, and across the variable LTV-based product range. Bank of Scotland (Ireland) and retail banking arm Halifax will also introduce the rate cut - effective from December 1st, 2008.
AIB will also pass on the rate to customers with standard variable and tracker mortgages, while EBS has stated the cuts will be effective from December.
Ulster Bank has announced that customers with standard variable rate and tracker mortgages will see their interest rate cut by 0.5 per cent from the first day of next month.
Fine Gael enterprise spokesman Leo Varadkar called on all banks to follow the ECB cut and said the speedy reaction from some banks would put pressure on others to follow.
“The ECB’s decision to cut interest rates again . . . should provide vital relief to hard-pressed homeowners, many of whom are struggling to meet their mortgage repayments. Small businesses also need access to cheaper capital. But the banks must ensure that the new rate is passed on as soon as possible, and in full.
“The swift action by some banks to pass on the interest rate cut shows that these banks have confidence in themselves. Institutions which do not cut their rates are sending out a message that they are under-capitalised and will add to further doubts about their future stability. It is therefore in the banks’ own interests to pass on the interest rate cut,” Mr Varadkar said.
Labour deputy leader Joan Burton also expressed the hope there will be no delay in passing the reduction. "It is simply not good enough for the Minister for Finance . . . to depend on the good will or commercial instincts of the banks to ensure that the reduction is passed on," the party spokeswoman on finance said.
"Particularly in the light of the generous rescue package put in place for the government, to the hazard of Irish taxpayers, he [Brian Lenihan] must ensure that the reduction is passed on."
Sinn Féin TD Arthur Morgan also called on the Minister to ensure that the ECB rate cut is passed on to local authority mortgage holders.
The Irish Small & Medium Enterprises Association (ISME) said it wanted financial institutions that do not pass on the cut in full to be named, shamed and sanctioned through a loss of the government bank guarantee.
ISME Chief Executive Mark Fielding said: “It is unacceptable and downright blackguardism that some banks are refusing to pass on the ECB rate reduction at a time when the Irish taxpayer has been forced to bail out these same banks to the tune of €400 billion.
“It is totally unacceptable that some of the main business banks in the country are still profiteering as hard pressed businesses are stretched, with redundancies spiralling, due to lack of affordable finance and other cost issues.
He added: “The Government must instruct the Financial Regulator to monitor the banks and name and shame any institutions that are not complying.”
Irish Mortgage Corporation director Frank Conway said the ECB rate reduction was "financial windfall" for many homeowners, particularly those on tracker rate mortgages.
"In total, today's half-point interest rate reduction could save mortgage holders over €31,000 or more, which would actually exceed the value of the average SSIA account.
"Combined with the previous interest rate reduction announced in October, mortgage holders are now likely to be paying €180 less per month for their mortgages than they were six weeks ago," he said.
He noted, however, that the outlook for those with standard variable rate mortgages was less certain, as bank have more discretion on passing on cuts in full.
