The European Central Bank unexpectedly cut interest rates in co-ordination with other central banks after the global credit crunch pushed borrowing costs to records and forced governments across Europe to bail out banks.

The ECB lowered its benchmark lending rate to 3.75 percent from 4.25 percent, effective from October 15, the Frankfurt-based bank said in a statement.

The move sparked immediate calls for Irish banks to pass on the 0.5 percentage point cut in rates to mortgage holders. If the full amount was passed on it would see an average €250,000 mortgage over 25 years drop by up to €90.