Irish mortgage holders have been delivered another blow before Christmas after the European Central Bank (ECB) hiked its interest rates on loans for the fourth time since the summer.
The additional 0.5% hike would add almost an extra €850 a year to the existing cost of the average Irish mortgage which the Banking & Payments Federation Ireland (BPFI) said was at €284,623 for homebuyers – surpassing the average at the height of the Celtic Tiger when, in the first quarter of 2008, the average mortgage was €268,220.
The ECB, seeking to dampen runaway inflation which kicked in after the long Covid lockdown, has now brought interest rates up from 0% to 2.5% over four meetings.
For the average mortgage identified by the BPFI, the rate hikes so far this year would amount to an additional €4,200 in repayment costs annually. Darragh Cassidy, head of Communications at Bonkers.ie, described the move as a “real-life Nightmare Before Christmas”.
And the bad news may not end there, as the EU banking authority – which sets interest rates across the Eurozone – says yet another increase in interest rates should be expected at their next meeting in February.With the ECB focused on inflation, there is no guarantee that interest rates won’t increase significantly again next year.
The head of Communications at price comparison site bonkers.ie said the move is a “real-life Nightmare Before Christmas”.
Mr Cassidy said that “although the ECB’s move was widely expected, this is still probably the last thing tracker customers wanted to hear right before Christmas. Many are now looking at significantly increased repayments compared to only a few months ago.”
“The increase in mortgage costs is now surpassing the increase in people’s energy bills. In spite of this, tracker customers, especially those paying a margin of 1% or less, can take some comfort from the fact their rates are still relatively competitive.
“Those on variable rates will also likely see an increase in their repayments over the coming weeks. Although the main lenders have not yet hiked their variable rates in response to any of the previous ECB increases it’s hard to see this remaining the case for much longer.”
Irish banks had, until recently, been slow to pass on interest rate rises, but big rate hike announcements have come from AIB, Avant Money, Bank of Ireland and PTSB in recent weeks.
The Government has said it is not considering bringing back mortgage interest relief for homebuyers.