ECB Cuts Main Rate to Record Low, Deposit Rate to Zero
http://www.bloomberg.com/news/2012-...te-to-record-low-of-0-75-deposit-to-zero.html
http://www.bloomberg.com/news/2012-...te-to-record-low-of-0-75-deposit-to-zero.html
The European Central Bank cut interest rates to a record low and said it won’t pay anything on overnight deposits as the sovereign debt crisis threatens to drive the euro region into recession.
Policy makers meeting in Frankfurt today lowered the ECB’s main refinancing rate to 0.75 percent from 1 percent, as predicted by 49 of 64 economists in a Bloomberg News survey. The ECB also cut its deposit rate to zero from 0.25 percent and its marginal lending rate to 1.5 percent from 1.75 percent. President Mario Draghi holds a press conference at 2:30 p.m. in Frankfurt to explain the decision.
''AIB’s standard variable mortgage rates will remain unchanged, while rates will remain under review at EBS,'' the bank said in a statement.
AIB said that as one of the country's ''pillar banks'', it has a fundamental role to play in the mortgage market here but said it must do so at a sustainable economic return.
It said that at current pricing levels, its mortgage portfolio - including its standard variable rate portfolio - remains loss making.
one of the newspapers had an article this week pointing out that you can borrow from AIB at the moment, put the money in a PTSB savings account and make a profit. These are 2 state-owned banks. That's not a sustainable situation.
The fatal flaw in the argument being that you can borrow at mortgage rates and be given the money into your hand to put on deposit...
44brendan;[I said:[/I]1272996]To be fair to AIB, it's cost of funds is not reduced by the ECB rate reduction.
Yes, they are like you say. However, there are no incentives being offered by the banks to pay down mortgages - particularly tracker mortgages - so until such time as there are, I will continue to pay the minimum.The problem is that many people with mortgages are putting money on deposit instead of paying down their mortgage debt.....There are lots of benefits to the banks having lower levels of debt out there.
To be fair to AIB, it's cost of funds is not reduced by the ECB rate reduction. While having sympathy for those on variable rates, we must also note that a rate reduction would be a net cost to the Bank. In effect it would be a government subsidy to variable rate mortgage holders.
Please explain. Why do they increase rates then when the ECB do?
Is it possible to get info on all the players in the Irish market what they will do about the cuts?
Maybe setup up a specific thread for easy reference after each move is announced by the ECB.
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