No relief for Irish borrowers as Lagarde insists talk of ECB rate cut 'totally premature'

Mortgage brokers say any rate reduction next year will not come in time to help the 70,000 Irish households whose fixed-rate mortgages expire at the end of this year

ECB president Christine Lagarde indicated rates would be held at current levels for some time. Picture: PA

The European Central Bank has kept interest rates unchanged, but there appears to be no early lifting of the financial pain for Irish households and businesses as the bank insisted that any discussion of cutting rates had not even started.    

ECB president Christine Lagarde indicated rates would be held at current levels for some time, saying that any debate on rate reductions was "totally, totally premature".

"Even having a discussion on [a] cut is totally, totally premature," she told a press conference in Athens. 

Asked how long it would take before the ECB started to cut rates, Ms Lagarde said the subject was not even discussed by the governing council at its rate-setting decision today.  

The ECB had started hiking rates at a record pace to fight soaring inflation in July last year.  The decision had, however, been widely forecast, and financial markets have started the guessing game of at what point next year the ECB would start cutting interest rates.  

Mortgage broker Michael Dowling said tracker mortgage holders may be forced to switch lenders. Picture: Denis Minihane

Mortgage broker Michael Dowling said any rate reduction will not come in time to help the 70,000 Irish households whose fixed-rate mortgages expire at the end of this year.

Tracker mortgage holders may also be forced to switch lenders, and "rate reductions look a long way off", Mr Dowling said.  

Stephen Hamilton, managing director of MortageLine, said the decision to leave rates unchanged was nonetheless "fantastic" for tracker-mortgage holders, who would not now face the almost customary monthly hike in their home-loan payments. However, the pain of rate hikes from the summer of 2022 would not go away, he said, and borrowing costs would stay at elevated levels.     

Surveys this week suggest the eurozone is teetering on the brink of recession, with output in Germany, Europe's largest economy, already possibly contracting. 

Ms Lagarde said the once-resilient services part of the economy was also slackening and the jobs market was cooling too. She reiterated that the ECB would weigh the economic data for the outlook of the economy and inflation pressures, including figures on wage growth.  

"Based on its current assessment, the governing council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal," the ECB said in its official statement. 

The ECB had announced its three rates would be unchanged at 4.5%, 4.75%, and 4%, respectively. "It came as no surprise that the ECB left its deposit rate at 4%. The decision was expected by every economist polled by Reuters and was fully priced into the markets," said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics. 

"Meanwhile, the statement that interest rates 'are at levels that, maintained for a sufficiently long duration, will make a substantial contribution' to bringing inflation down to the target, suggests that most policymakers think rates have peaked and that they will remain at current levels for a long time," he said. 

Capital Economics forecasts the ECB will keep interest rates at current levels well into next year.