Taoiseach welcomes ECB decision to cut interest rates

The Taoiseach has welcomed the European Central Bank’s decision to cut euro zone interest rates and reiterated his call for banks to pass the change on to customers.

“Many households have experienced increases in their monthly mortgage repayments during a cost-of-living crisis,” Simon Harris said.

“As we move into an era of interest rate reductions, we need mortgage holders to feel the benefit.

“I have written to the banks and will be meeting them shortly for a discussion on this,” he added.

The widely-expected move will see the interest rate on its main refinancing operations fall from 4.5% to 4.25%.

The rate on its marginal lending now stands at 4.5%, while its deposit facility interest rate is 3.75%.

The rate changes will take effect from 12 June.

However, it is unclear if banks will do so immediately.

Minister for Finance Michael McGrath said it is important banks treat customers “fairly and consistently”.

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Speaking on RTÉ’s News at One, he said: “Where interest rates went up in line with the ECB changes then they should fall as ECB interest rates come down. I think that is the key point.”

Mr McGrath added there was a significant element of competition in the sector.

He said the cut is against the backdrop of ten increases that amounted to 4.5%.

“It will take some pressure off many borrowers but it is only a small fraction of the amount of the increases,” Mr McGrath said.

Banking and Payments Federation Ireland CEO Brian Hayes said interest rates and pricing were a decision for individual banks and they were legally prohibited from signalling any future price change.

“Over the last two years, which has seen a series of ten separate interest rate increases, lenders have sought to take a balanced approach in the pass-through of these rates mindful of the cost of living challenges which households have had to contend with,” Mr Hayes said.

“When comparing rates across the eurozone member states, banks in Ireland have passed through the third lowest increase in new mortgage interest rates between May 2022 and April 2024.

“In fact, while the ECB has raised interest rates by 4.5% points, the average rate on new mortgages in Ireland has only risen by 1.51% points, or a third of the full ECB increase,” he said.

Regarding non-bank lenders in the Irish market, some of whom charge interest of up to 7%, Joey Sheahan Head of Credit with mymortgages.ie said they were more directly affected when the ECB rates increased, so the rate reduction will take pressure off them.

“They should hopefully be able to pass this saving to customers,” he said.