Huge blow to thousands as ECB hikes mortgage rates 0.5 percent followed by ANOTHER next month

THE European Central Bank hiked interest rates again today and promised at least one more hike of a similar magnitude next month.

The ECB today hiked interest rates by 0.5 percent, bringing the deposit rate to 2.5 percent and the policy rate to 3 percent.

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The ECB has hiked interest rates four times since July last year in a bid to curb inflation.

It’s estimated that this increase means monthly repayments for Tracker mortgage customers will increase by €50 for every €100,000.

The next hike on the horizon is expected to be of a similar magnitude.

The ECB said: “Given underlying inflationary pressures, the Governing Council intends to raise interest rates by a further 50 basis points at its next monetary policy meeting in March, and will then assess the future stance of its monetary policy.”

Before the decision, investors and economists were expecting the ECB to hike its deposit rate by another 50 basis points in March, taking it to a peak of up to 3.5 percent by summer

That would be the highest value since the turn of the century.

Trevor Grant, Chairman of the Association of Irish Mortgage Advisors, said: “For the 200,000 or so Tracker mortgage customers who have yet to do this, it’s definitely worth considering setting your mortgage rate before it’s too late.

“This advice also applies to those with variable interest rates or those with fixed interest rates maturing in the next 12 months or so.

“This latter cohort may be able to terminate their existing fixed rate arrangement without penalty and commit to lower interest rates than are likely to be available when their current fixed rate actually matures.

“All indicators suggest that the ECB will continue to hike rates as long as core inflation remains what has been described as “stubbornly high” and core inflation forecasts remain above 2%.

“Based on that, it is important that all of these mortgage customers review their existing terms and seek market-based advice from a mortgage broker to help them understand their interest rate options.”

Joey Sheahan, head of credit and online broker MyMortgages.ie, said further increases are likely to continue.

He said: “If rates continue to rise throughout the year we will likely see a full reassessment of the fixed and variable rates offered by lenders, so all mortgage holders should look at their current situation and assess what is the best move for them.

“Another 0.5 percent ECB rate hike today brings the rate hikes that have hit many mortgage holders over the past 6 months to 3 percent.

“Just the 0.5 percentage point rate hike in January alone will easily add another $600 per year to the mortgage bills of a homeowner with a $200,000 15-year tracker mortgage.

If you have a tracker, there are several factors you need to consider before you give it up – because there really is no turning back.

“One of the most important decision factors for tracker owners is the range their tracker is set to.

“This will determine what kind of savings are likely to be realized by switching to a different plan.”