ECB interest cut - Banks must pass on the windfall

WITH good news rarer than hen’s teeth in these troubled times, the surprise decision of the European Central Bank (ECB) to cut eurozone interest rates will be welcomed by hard-pressed mortgage holders struggling to pay arrears.

The burning question is whether the banks will have the decency to pass on this windfall to their customers. The promise of Permanent TSB to pass on the rate cut to customers with both variable and tracker mortgages is a good omen. But there is no guarantee that all of the financial institutions now being bailed out by beleaguered taxpayers will be equally sympathetic to borrowers.

The interest rate reduction to 1.25% from 1.5% could mean a monthly saving of up to €15 per €100,000 borrowed by those fortunate enough to have a 25-year tracker mortgage. But for tens of thousands of people on variable mortgages the outlook is less certain. If other banks fail to pass on the latest interest rate cut, people will look to Financial Regulator Mathew Elderfield for protection. Significantly, the regulator was reminded yesterday of his recent promise to take action if cuts were not passed on. The reminder of that pledge came from Finance Minister Michael Noonan who was commenting on the latest cut. Not mincing his words, he emphasised that “obviously the banks should pass it on. It will automatically pass on to trackers. But I think the regulator has already made it clear that he will intervene if he thinks that rate cuts in Europe are being absorbed by the banks rather than being passed on to customers”.