Hundreds of thousands of homeowners are paying an extra €2,000 a year on their mortgage payments, with two more rate hikes likely by the end of the year.
oney markets now expects the European Central Bank’s interest rates to rise by 0.75 percentage points this month, with a 0.5 percentage point rise in December.
Such increases would mean that repayments on a tracker mortgage with a balance of €150,000 are up €2,000 over a full year since the summer.
Nearly half a million tracker and adjustable rate borrowers are vulnerable to higher ECB rates.
Minutes from the September meeting of the European Central Bank (ECB) show that its members are looking to act vigorously to avoid sharper rate hikes in the future, according to an investor note from Davy Stockbrokers chief economist Conall MacCoille.
Since that meeting, inflation in the euro zone has reached 10 percent.
Mr Mac Coille said money markets, or so-called overnight index swaps, predicted a 0.75 percentage point rise in euro interest rates at the October 27 ECB meeting and a 0.5 percentage point rise at the October 15 ECB meeting. imply December. This would bring the ECB interest rate to 2.5 percent.
“Markets see ECB interest rates peaking at 3 percent in mid-2023,” wrote Mac Coille.
In July, the ECB announced a 0.5 percent rate hike before raising rates again to 1.25 percent last month.
The two most recent rate hikes have left a family with 15 years left and €150,000 for a tracker to face an additional €84 in monthly payments.
Over a year, that adds up to €1,000. This applies to a tracker with a margin of 1 percent above the ECB’s refinancing rate.
If there are similar hikes in ECB rates this month and December, it means this family is set to rise with monthly repayments of €170 since the summer.
Over a full year, this means that the repayment costs for this tracker have increased by €2,000.
The three main banks have increased tracker rates but have yet to increase variables. AIB, which has the largest floating rate book and lower floating rates than Bank of Ireland or Permanent TSB, may increase floating rates first.
People whose mortgages were sold by the banks and who are now controlled by the likes of Pepper have seen a rise in tracker and variable rates.
Pepper manages 60,000 mortgages that banks have sold to vultures, but these borrowers are unable to set their interest rates once their mortgage has been sold.
Non-bank lender ICS Mortgages has raised its lending rates three times this year, with Finance Ireland’s rates rising twice by up to 2 percentage points in the last step. Avant Money has hiked interest rates twice.
A large number of mortgage holders have chosen to fix their interest rates to secure interest rates as low as 2.25 percent. However, those trying to switch lenders to get the currently lower fixed rates have been frustrated by massive delays in processing applications.
It takes up to four months for the mortgage to be drawn, leading to fears that rates will have risen in the meantime. The interest rate a borrower receives is not the one they were approved for at the beginning of the exchange process, but the interest rate at the time of the drawdown.
The central bank has said it has no plans to force lenders to comply with interest rates at the time of mortgage approval.
And those concerned that their tracker is becoming too expensive have been advised to pay for independent advice from a broker.
Individuals with existing fixed rates that have now become expensive can opt for a more competitive rate with the same lender by asking for that rate. Most lenders do not charge break fees.
https://www.independent.ie/business/personal-finance/property-mortgages/two-more-rate-rises-before-end-of-year-may-add-2000-to-tracker-repayments-42049792.html Two more rate hikes before the end of the year could increase tracker repayments by €2,000