450,000 homeowners already facing higher mortgage rates in July

The European Central Bank could hike rates as early as July but certainly not later than September, nine sources familiar with the ECB’s mindset told Reuters.

A 0.25 percentage point increase in the ECB interest rate could add €380 per year to the cost of a typical €250,000 adjustable rate mortgage.

With two rate hikes, this could cost a typical household at a floating rate $760 over a year.

An ECB rate hike will make variable and tracker mortgages more expensive. It will also mean more expensive new fixed rates.

About 200,000 homeowners have standard variable interest rates and will pay more with the installments. Around 250,000 are on trackers that rise or fall as the ECB rate changes.

About 60 percent of homeowners still use a combination of variable and tracker rates, the central bank said last October.

A 1 percentage point increase in the key interest rate of the European Central Bank would cost them 140 euros a month, it was said at the time.

The policy makers of the ECB are under pressure to act due to the surge in inflation across the eurozone.

Governing Council members have long criticized the ECB for underestimating inflation, which hit 7.5 percent across the zone last month.

ECB President Christine Lagarde said last week that asset purchases to stimulate the euro-zone economy should end early in the third quarter and a rate hike this year is likely.

Almost all sources said they see at least two rate hikes this year, but some have argued a third is also possible, although it depends heavily on how markets digest those moves.

Fixed rate mortgages have been used extensively in this country as they are cheaper than variable rate mortgages.

However, an increase in the key ECB interest rate would make future fixed interest rates more expensive.

The tracker interest rates automatically increase when the ECB interest rate increases, with the variables generally increasing when interest rates in the Eurozone rise.

Mortgage rates have been cut by Permanent TSB, Bank of Ireland and EBS in recent weeks.

However, ICS Mortgages increased interest rates towards the end of February.

Mortgage experts have said Irish mortgage rates are now likely near the lowest they will ever be and have encouraged those with variable rates to stick with fixed rates.

Joey Sheahan of online broker MyMortgages.ie and author of The Mortgage Coach warned that a series of rate hikes could be on the way.

“With a first ECB rate hike now looking inevitable in the next few months, we could see two or three rate hikes in total over the next 12 months.

He said this could mean interest rates would rise by 0.75 percentage point for most Irish mortgage holders.

Mr Sheahan said those who don’t have a tracker should stick to fixed rates.

Mark Coan of brokerage MoneySherpa said markets have priced in rate hikes of about 1 percentage point over the next 18 months.

“An ECB rate hike means higher borrowing costs for banks and potentially higher mortgage rates for borrowers. With fixed rates currently at record lows, we are advising clients to lock in now to avoid increased repayments.”

Mr Coan said that to get the best long-term fixed rate you usually have to switch lenders, which takes at least two months, so people need to act now.

Meanwhile, research conducted by Bonkers.ie in partnership with Red C has revealed that 89 per cent of consumers are concerned about rising prices.

Inflation in Ireland is currently 6.7 per cent, meaning prices are rising at their fastest rate in 22 years. It is expected to exceed 8 percent in the coming months.

The research found that 89 percent of people say they are very worried or worried about rising gas and electricity prices.

And 81 percent of people are very concerned about rising petrol and diesel prices. Food prices are also of great importance.