ECB interest rate cut will put pressure on banks

COMPETITION among mortgage lenders is likely to force banks to pass on yesterday’s ECB 0.5% interest rate cut rather than increase their margins to offset the imposition of the new €100 million a year government stamp duty level.

Stockbrokers Merrion Capital analyst, Seamus Murphy said that interest rate cuts following on the ECB move are likely, saying this will put modest pressure on the earnings of some financial institutions.

Financial institutions make profits on mortgage lending by imposing a margin on the ECB rate and the greater the spread between the ECB rate and the mortgage rate offered by the lending institution the great the profits generated.