Banks should treat customers “fairly and consistently”, the finance minister has said, as the European Central Bank (ECB) cut interest rates for the first time in years.

The move to cut its main lending rate by 0.25 per cent will impact mortgage holders across the state.

The ECB’s key lending rate, which affects mortgage rates, will fall from 4.5 per cent to 4.25 per cent.

We cut our key interest rates by 0.25 percentage points.

Keeping interest rates high for nine months has helped push down inflation.

It is now appropriate to moderate the degree of monetary policy restriction.

Read our monetary policy decisions https://t.co/AaaLd3hGEB pic.twitter.com/dTTYKg7itm

— European Central Bank (@ecb) June 6, 2024

There are around 186,000 tracker mortgage accounts in Ireland, which are automatically impacted by changes to ECB rates.

Finance Minister Michael McGrath said that while the number of tracker mortgage customers was less than 186,000, the cut would still be welcomed by a significant number of people.

Asked whether banks should pass on the cut in the interest rate, Mr McGrath told RTÉ News At One: “The pricing of mortgages is a commercial decision for the banks and what is important is that they treat customers fairly and consistently.

“They should be treating people fairly and where interest rates went up in line with the ECB changes, then they should fall as ECB interest rates come down.

“We do have significant elements of competition now. The credit union sector has been considerably strengthened, is doing a lot more activity in the mortgage space.

“We also have non-bank lenders now who are actually underwriting and originating mortgages in Ireland, and that is welcome news as well because that adds to competition.

“The important thing here is that there is consistency of treatment for both borrowers, but also for savers. And if the interest rates went up in line with ECB, then they now need to come down in line with ECB and that’s what we’ll be watching very closely.”