ECB Rate Hike Looms: 70% of Irish Mortgage Holders Face Higher Costs
The ECB is set to raise interest rates, impacting 70% of Irish mortgage holders. Two-thirds on fixed rates will face higher costs as terms expire within two years. Homeowners should assess their mortgage details and explore options like re-fixing or switching banks to manage potential increases.
The European Central Bank (ECB) is expected to raise interest rates next week, potentially increasing mortgage costs for Irish homeowners. Mark Cassidy, director of financial stability at the Central Bank of Ireland, noted that 70% of Irish mortgage holders are on fixed rates, but two-thirds of these will face higher rates within the next two years as their terms end.
Conor McGowan, managing director of Finance Solutions, anticipates two to three rate increases this year, with a 25 basis point hike likely in June. This could add approximately €13 per month per €100,000 outstanding balance on a variable rate mortgage, meaning an average Irish mortgage of €350,000 could see an extra €45.50 monthly.
Banks' reactions will vary based on their funding sources and hedging strategies. Mortgage holders are advised to contact their banks to confirm their current rate, type (fixed/variable), and fixed-term end date. Understanding loan-to-value ratios and Building Energy Ratings (BER) can help secure better rates, including lower-cost «green» options. Comparison calculators or brokers can assist in exploring available rates.
For those whose fixed rates are ending, rolling onto a bank's variable rate will likely result in significantly higher repayments. For example, a homeowner with a €240,000 mortgage on a C-rated home, coming off a 2.4% five-year fix, could see repayments jump by €223 monthly on a 4.15% variable rate. Switching banks or re-fixing for a new term can mitigate these increases.