HOMEOWNERS can expect to make further savings next year with more interest rate cuts likely, following yesterday’s historic move by the European Central Bank (ECB).

The bank lowered its key interest rate by the most on record yesterday — by three quarters of a percentage point — to 2.5%.

This brings the base rate down to the level it was at two and a half years ago. The latest rate cut will mean savings of more than €100,000 for the average mortgage holder.

Mortgage holders on a typical €300,000 loan over 30 years have now raked in savings of more than €300 since September. The cut will mean savings of more than €128 a month for those on tracker mortgages.

“The bigger picture here is that we need sharply lower rates in the future, and that will mean even more cuts down the line,” said Paul Robson, a currency strategist at Royal Bank of Scotland.

The cut in the main re-financing rate was the ECB’s second in a month and follows similar cuts in Britain, Sweden and New Zealand.

The Bank of England cut its main interest rate by one percentage point to 2%, the lowest level since 1501.

A homeowner with 29 years remaining on a €300,000 loan is now in line to see their total mortgage interest bill decrease by as much as €110,000 over the remaining term of their loan, according to director of the Irish Mortgage Corporation, Frank Conway.

“Without realising it, owning a home just got a whole lot cheaper, even for those who have already purchased,” said Mr Conway.

“Never before have rates fallen so far in such a short period of time. It’s a much needed bonanza for homeowners,” he added.

The cuts since September represent the steepest combined cuts in such a short period of time. Yesterday’s three quarter point reduction is the largest single rate reduction ever announced by the bank.

“Many homeowners may not realise they have the option of paying a little extra onto their mortgage every month, this would knock additional thousands of euro and years off their mortgage,” said Mr Conway.

AIB Bank, Bank of Ireland and Bank of Scotland (Ireland) all said they would be passing on the cut in full

Analysts have suggested the bank could now slash its main lending rate to as low as 1.5% by March to boost the euro zone economy.

Trevor Grant, managing director of the Select Mortgage Group said the slashing of interest rates will benefit landlords as the reductions will combat any suggested fall in rents.

- IRISH EXAMINER, Niamh Hennessy