The European Central Bank (ECB) has lowered interest rates for the third time this year, saying that inflation is increasingly coming under control while at the same time the European Union’s economic outlook worsens.
The ECB announced Thursday that it was undertaking its third quarter-percentage-point cut of the year, resulting in a benchmark rate of 3.25 percent.
However, tracker mortgage holders will note that the latest rate cut to the ECB refinancing rate, which tracker mortgages are priced off, brings it to 3.4 percent. As a result, financial analysts have said that tracker mortgage holders will benefit with lower repayments, such as potential annual savings of over €2,500 for many of the country’s 180,000 tracker mortgage customers.
Meanwhile, the interest rates on the marginal lending facility will be decreased to 3.65 percent, with the cuts due to take effect from October 23.
“The incoming information on inflation shows that the disinflationary process is well on track,” the ECB said in a statement. “The inflation outlook is also affected by recent downside surprises in indicators of economic activity.”
“Domestic inflation remains high, as wages are still rising at an elevated pace. At the same time, labour cost pressures are set to continue easing gradually, with profits partially buffering their impact on inflation,” the ECB said.
The latest cuts represent the first time the ECB has reduced rates at consecutive meetings in 13 years, since December 2011.
The Irish Times reports Daragh Cassidy of Bonkers.ie saying that while tracker customers will benefit immediately from the reduced rates, the “move will also put further downward pressure on variable and new fixed rates”.
However, he warned that the measures could “add further fuel to an already over-heating property market, which is really the last thing that we need”.
This comes in the wake of news that residential property prices have increased by 10.1% over the 12 months to August 2024, according to findings from the Central Statistics Office (CSO).
This puts prices 13.4 percent above the ‘property boom’ peak of April 2007.
Dublin is currently experiencing prices 1.8% higher than their February 2007 peak, while residential property prices throughout the rest of the country are 14.0% higher than their May 2007 peak.