low interest rates

I can virtually hear certain Irish mortgage holders sing Oh Happy Day as a result of the European Central Bank cutting its main interest rate from 0.05% to 0% this afternoon. Are they happy ?

40 year term, interest only for the full term and a tracker rate to boot… two Irish lenders who offered this package also happened to have the lowest lender margin – what they receive in return .. a paltry 0.5%. So after today’s cut, for these lucky mortgage holders, their total mortgage interest rate is 0.5% – you bet they are happy.

The rate was cut as part of a package of measures intended to revive the eurozone economy while the bank is also expanding its quantitative easing programme from €60billion to €80billion a month. Three months ago stimulus measures were announced but have failed to drive economic growth higher or boost inflation.

ECB president Mario Draghi told a news conference in Frankfurt that it had cut eurozone inflation projections to reflect the recent decline in oil prices. The bank now expected inflation to be just 0.1% this year – substantially lower than the previous estimate of 1% and underlining the need for the bank to go further than expected. Inflation should rise to 1.3% in 2017 and 1.6% the following year, according to its estimates.

Mr Draghi stated “We are not in deflation” and warned that risks to economic growth across the 19 countries that use the euro remained “tilted to the downside”. The governing council expected the bank’s key interest rates “to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases”.

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