ECB hikes rates for fourth time, hitting mortgage holders again

THE European Central Bank announced another hike in its key interest rates, which will cause even more pain for those with trackers and floating rates.

The move is expected to hit those whose mortgages have been sold to vulture funds hardest, as they are stuck on variable rates that are the highest in the country.

The European Central Bank’s (ECB) main refinancing rate, which is directly linked to the tracker rate and drives floating rates, rose 0.5 percentage points.

It is the ECB’s fourth rate hike since the summer.

Every 0.5 percentage point increase in European interest rates increases monthly repayments by about €25 for every €100,000 owed on a typical tracker mortgage. Seen over a year, that’s €300 in special repayments.

The cumulative impact of the four rate hikes will be almost €3,000 on a typical tracker of €200,000 over a 25-year term.

The ECB, led by Christine Lagarde, has aggressively hiked interest rates in an attempt to stem prices that have soared over the past year.

European economies were under inflationary pressures attributed to economies reopening after the Covid-19 pandemic caused by supply shortages and then rising energy costs due to the Russian invasion of Ukraine.

The central bank of the 19-country euro zone has now raised its key interest rates four times.

Economists expect the ECB to continue raising interest rates, but at a slower pace, as inflation is expected to be near its peak and the Frankfurt institution seeks to reduce its huge holdings of government bonds.

Pepper, which oversees about 60,000 mortgages owned by vulture funds, said the new ECB rate hike will initially only affect tracker mortgage customers, where such increases are automatically passed on as part of their contract.

“There will be no immediate impact on floating rate customers and no decisions have been made to pass on this additional ECB hike.”

It was “aware that this is a challenging time for many people and our team stands ready to help anyone who is concerned about their ability to make the payments with a wide range of solutions that we can provide.” can tailor to their individual situation”.

Mortgage servicers like Pepper and Start and the funds that own the loans have been heavily criticized for passing on all four ECB rate hikes in full to most of their customers.

These mortgage holders tend to rely on variable interest rates because the service providers and vultures don’t give them the ability to set their interest rates.

And most whose mortgages are vulture-owned cannot switch lenders because many have defaulted in the past, or have a split mortgage where part of the loan is deferred and paid off at a later date.

People whose loans have been sold have already seen their interest rates rise as high as 6.5 percent, with some now at 7 percent.

They have no way to fix it, prompting consumer advocates to say they are “mortgage prisoners.”

Recent figures from the central bank show that there are nearly 200,000 mortgage accounts with a tracker rate.

Another 150,000 are floating rate.

Tracker rates are hit every time there is an ECB rate hike. The big banks haven’t increased their variable rates, but non-bank lenders and vulture funds have increased variable rates. ECB hikes rates for fourth time, hitting mortgage holders again

Fry Electronics Team

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