Updated, 13:03
THOUSANDS OF TRACKER mortgage holders have been handed some relief today, with the European Central Bank cutting its main interest rates.
The governors of the Frankfurt-based bank took 0.25 per cent off the bank’s main rates at their meeting in Bratislava today.
Inflation throughout the eurozone has fallen in the last few months – and last month stood at 1.2 per cent, its lowest in over three years.
The ECB’s main stated task is to maintain price stability – that is, to keep the cost of living relatively unchanged – and usually interprets this to mean an ‘ideal’ inflation rate of 2.0 per cent.
When inflation is considered too low, the ECB can increase it by introducing more money into circulation – done by reducing its interest rates in an effort to entice more borrowing from commercial banks.
The move is good news for the holders of tracker mortgages, however, who would see an immediate drop in the interest rates charged to their mortgages.
It may be slightly less optimistic news for the holders of other mortgages, however – with many banks shouldering losses on their tracker mortgages, and needing to make up the money through penal increases on other variable rate loans.
The cut is mark the fourth cut in the ECB’s rates since Mario Draghi took office as its president in November 2011.
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