Key Post Technical reduction in ECB rate coming into effect on 18th September

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Nuttynuts

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There was talk in news a couple of months back (on rte.ie on 15th March) about a likely change for tracker mortgages in September. It was in relation to a technical change by the ecb. The ecb were planning to reduce the refinancing rate by .35%.....my tracker is plus ECB plus 1.05%. My understanding is the change would reduce this 1.05% by .35%....hence my rate would then be ECB plus .7%.

I have seen nothing recently and wondered if anyone else had any thoughts/information
 
Nuttynuts said:
The ecb were planning to reduce the refinancing rate by .35%.....my tracker is plus ECB plus 1.05%. My understanding is the change would reduce this 1.05% by .35%....hence my rate would then be ECB plus .7%.
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The main ECB rates are:

Deposit RateMain Refinancing RateDifference
As at Aug 20243.75%4.25%+0.50%
Post technical change - Sep 20243.75%3.90%+0.15%

Source

The tracker mortgage is priced off the Main Refinancing Rate (currently 4.25%).

After the technical change, the spread will narrow between the Deposit Rate and the Main Refinancing Rate by 0.35%.

The agreed margin that you have contracted with the lending institution will remain at +1.05%, but you are getting a cut in the base rate that the loan is being priced off (not a cut in the margin charged, but the effect is the same).

The change is proposed to come into effect on the 18th of September according to the ECB.
 
On 13 March 2024 the ECB announced changes to its operational framework for implementing monetary policy. The spread between the rate on the main refinancing operations and the deposit facility rate will be reduced to 15 basis points. The rate on the marginal lending facility will also be adjusted such that the spread between the rate on the marginal lending facility and the rate on the main refinancing operations will remain unchanged at 25 basis points. These changes will come into effect on 18 September 2024. The main refinancing operations will continue to be conducted through fixed-rate tenders with full allotment against broad collateral.

The spread is currently 0.5%
This will be reduced to 0.15%
So the reduction is 0.35%
 
Thanks all. I just wondered why it is so low key in news when there is always loads of media when ecb actually reduce the rate folliwing meetings. If rate reduces by this .35 and an additional .25 (if September is reduced following Sep meeting) that is a total reduction of .6 which is significant to me !
 
I suppose this rate change is not in the news as much, as it is a technical change to monetary policy, rather than a cut to the headline rate, which journalists are more used to dealing with.

But, as you say, it is significant.
 
AFAIK, years ago, the key policy rate was the main refinancing rate.

Whereas now, the key policy rate is the deposit rate.
 
"Relief for mortgage holders as string of rate cuts on the way"

https://www.independent.ie/business/relief-for-mortgage-holders-as-string-of-rate-cuts-on-the-way/a758428128.html
Nice article this morning in Independent mentions this "technical cut" ....Great news
 
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I had to call Pepper Mortgage for them to apply the last one so it only took effect from Aug as did the reduced amount?
 
Will this mean a permanent reduction in interest income from the tracker mortgage books of banks, without any corresponding reduction in wholesale or retail deposit rates?
 
Rebel Rebel said:
I had to call Pepper Mortgage for them to apply the last one so it only took effect from Aug as did the reduced amount?
Click to expand...

Same here. I believe it takes about 3 months from after a rate change announcement for the amount to be changed.
 
I rang AIB about the reduction to the refinancing rate due in September and they had no clue.
Emailed them and got no response.
 
ragdal said:
I rang AIB about the reduction to the refinancing rate due in September and they had no clue.
Emailed them and got no response.
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Just off the phone to Pepper and the guy had no clue either. Just kept saying that there is no letter on my account! I asked would a letter be issued and how soon after the event and he had no idea!
Guess I'll just have to wait and see what happens.
 
Rebel Rebel said:
I had to call Pepper Mortgage for them to apply the last one so it only took effect from Aug as did the reduced amount?
Click to expand...
TRS30 said:
Same here. I believe it takes about 3 months from after a rate change announcement for the amount to be changed.
Click to expand...
On a standard variable rate loan and not a tracker I presume? Or do their loan agreement terms and conditions for trackers allow for a lag on applying ECB base rate changes?
 
ClubMan said:
On a standard variable rate loan and not a tracker I presume? Or do their loan agreement terms and conditions for trackers allow for a lag on applying ECB base rate changes?
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The latter for me. I had this out with them some years ago and if I remember correctly T&C say they have 90 days to implement changes.
 
In before the lock.
Deposit rates will be slower to adjust.
I have taken the decision to lock in for another year.
Not interested in the online banks.
 
Brendan Burgess said:
They are not obliged to pass it on to anyone other than tracker customers
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Same as the standard/non-tracker variable rate mortgage loan agreement terms and conditions with most or all lenders as far as I know? Such agreements usually (always?) give the lender complete latitude over how the rate is set and if/when market rate changes are passed on. It's been discussed before here on Askaboutmoney and personally I always thought that these contracts were unfair to the borrower but the FSPO rejected a complaint against BOI that I helped take on this issue years ago.
 
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