ECB Expected to Raise Interest Rate by 0.25% to 2.25% on Thursday
The ECB is expected to raise its interest rate by 0.25% to 2.25% on Thursday, the first hike since 2022, to combat inflation. This will increase mortgage repayments for 110,000 Irish customers and impact borrowing costs. Savers may benefit if banks pass on the higher rates.
European Central Bank (ECB) President Christine Lagarde is expected to announce a 0.25% interest rate hike on Thursday, bringing the rate to 2.25%. This marks the first increase since 2022, initiated to combat rising inflation, which is currently 3.2% across the 21 euro countries and 3.5% in Ireland as of May, exceeding the ECB's 2% target.
The rate increase will directly impact Ireland's 110,000 tracker mortgage customers with higher repayments. A 0.25% increase on a €300,000 loan over 25 years adds €37 monthly. While fixed rates from Irish banks may offer better value than variable loans initially, new fixed-term loans are expected to increase over time. Michael Dowling of Irish Mortgage Brokers notes that banks like AIB, Bank of Ireland, and PTSB have capacity to absorb some increases.
Observers anticipate at least one more rate hike this year, possibly in September. The ECB's move also benefits savers, provided banks pass on the increased returns. Consumers are advised to shop around for the best savings deals as financial institutions often do not fully transfer higher rates to savers. This comes as consumers already face rising costs for food, electricity, gas, and volatile fuel prices.