Banks to cut variable rates by July 1

Finance Minister Michael Noonan has given banks until July 1 to cut interest rates for hundreds of thousands of mortgage holders, or face penalties.

The six main lenders have agreed to the reductions after bank bosses were confronted with a stark Central Bank report which said higher than necessary rates for mortgage owners were dragging down the economy.

Government sources said last night that rate cuts of up to 0.75% could be expected over the coming year.