The European Central Bank cut its benchmark interest rate by 50 basis points to 2 per cent this afternoon, matching its lowest-ever rate as inflation plummets and recession spreads.

The cut, in line with consensus forecasts, marks the fourth cut in just over three months amidst signs the financial crisis is biting hard into the real economy and inflation threatens to fall further below the ECB's 2 per cent ceiling.

It will result in a saving of €50 per month for the holders of a €200,000 mortgage over 20 years, based on a tracker mortgage with a margin of 1.3 percentage points.

Most lenders have stated today that they will pass on the full interest rate cut to mortgage customers