Relief for people with tracker mortgages as three ECB rate cuts on the cards this year, economists believe

A majority of 82 economists polled by news agency Reuters have ­predicted two further reductions, one in ­September and one in December.

This is a sharp pullback from six ­expected at the start of the year.

Today’s reduction, which will see rates falling from a 22-year high, will affect tracker mortgage holders next month. There are 180,000 customers with ­tracker mortgages, which represent around a quarter of the mortgage market.

Every cut of 0.25 points will knock €15 off the monthly repayments on a typical tracker. Most of those on ­trackers still owe around €100,000 and have around 15 years left to pay.

Tracker customers will also see a ­further one-off fall of 0.35 percentage points in September as the ECB aligns its various rates, which will provide a further reduction in monthly repayments.

Those with trackers have been hit hardest by the 10 hikes in ECB rates that started in the middle of 2022.

This is because each rise, or fall, in the ECB’s refinancing rate is automatically passed on to tracker mortgage holders.

Rate-cut expectations have been pared back as inflation is still a problem.

Eurozone inflation data came in at a slightly higher rate than forecast last month. Annual inflation ticked up to 2.6pc in May, from 2.4pc in April, stalling moves for more, and faster, ECB rate cuts.

Broker Michael Dowling said mortgage holders coming to the end of fixed rates and thousands of people on variable rates will be depending on their bank in terms of what happens their rate in the wake of the ECB cut. He said the key ECB refinancing rate increased to 4.5pc last September, but banks only increased their fixed rates by between 1.75 percentage points and two points.

Mr Dowling said variable rates only increased by one percentage point at the AIB Group, which includes EBS and Haven, while Bank of Ireland reduced its variable rate and PTSB increased its by 0.25 points.

“Banks will not pass on the full rate reductions as their appetite for market share and, more importantly, profitability determines the pricing of fixed and variable rate mortgages,” Mr Dowling said.

Managing director of Doddl.ie Martina Hennessy said the fixed-rate decreases we have seen over the last two months have already factored in anticipated ECB rate decreases.

“It is impossible to predict future rates accurately, but we are unlikely to see rates fall to the low levels experienced pre-2022,” she said.

That was a period when rates were below 2pc. However, Ms Hennessy predicted that we are likely to see further decreases on individual rates.

She said this is particularly the case for non-bank lenders, which are lending at rates of up to 7pc. They should start to reduce rates as funding costs decrease.

This week, it emerged that Taoiseach Simon Harris is to seek a meeting with the heads of all Irish banks where he plans to insist on rate reductions being passed on “without delay”.

The ECB is cutting interest rates as it feels the 10 increases it implemented up to last September has contributed to bringing down the headline inflation rate in the eurozone. It has come down from a peak of 10.6pc in October 2022 to 2.6pc in May this year.