This seems to be a very difficult concept for people to understand.
The cost of a mortgage is the interest charged and not the monthly repayment, as the monthly repayment includes a capital repayment.
The easiest way to explain this is to compare the interest charged with the repayment over various terms
Mortgage: €100,000 @ 3% interest
The monthly cost of this mortgage is the same for all three terms. The repayments are very different.
So let's look at the savings from an interest rate cut
Take a mortgage of €100,000 at 3% reduced to 2% with the same term of 20 years
Why, you might ask, does the repayment not go down by the interest? Because when interest rates are reduced, you pay off more capital with each repayment.
So after a year where the interest rate was reduced from 3% to 2%...