Mortgage holders could see repayments fall again

MORTGAGE holders could see their repayments fall again today with a cut in interest rates expected.

Those on tracker rate mortgages will see their repayments reduced automatically if the European Central Bank (ECB), as expected, cuts interest rates.

However, the thousands of people on standard variable rates may not see a cut.

This news comes as ratings agency Moody’s said it expects arrears levels on mortgages in Ireland to remain elevated for several years.

The ECB is expected to cut interest rates by 0.25% or 0.5% today.

However, homeowners on standard variable rates will have to wait to see if their bank passes on the cut.

When the last interest rate cut was announced last month, Bank of Ireland did not pass on the cut while AIB, Permanent TSB and EBS did.

A 0.25% reduction in interests rates results in a €15 drop in repayments on a €100,000 mortgage.

Director of the Irish Mortgage Corporation Frank Conway said any rate cuts announced in December would not immediately impact on household finances as mortgage interest rates would, most likely, not be lowered until January.

As part of the Budget announcements this week the Government said it was increasing the rate of mortgage interest relief for those who bought in the boom years to 30%.

They also said that anyone willing to buy a house in 2012 would get a higher rate of mortgage interest relief.

The ECB is meeting today in Frankfurt and if it agrees to another rate cut of 0.25% then rates will once again be at a record low of 1%.

A Reuters survey of 73 analysts showed a 60% chance that the ECB will cut rates by 0.25% today. It cut rates by a similar amount in November.

Today’s ECB meeting comes a day before a key EU summit that aims to agree a treaty change to anchor coercive budget discipline for the 17-nation currency area.

Moody’s said it expects arrears in Irish residential mortgages to rise at a slower pace in 2012.

“Increasing unemployment and lower incomes arising from austerity measures will continue to hurt borrowers’ ability to meet their financial obligations,” Moody’s said.