Q&A: What today's ECB rate hike will mean for me and my mortgage
This Expected Into And Further Year Rate Hikes 2023 Are
The European Central Bank (ECB) has announced its third interest rate hike today adding 0.75% to its base rate.
The rate hike, the third this year, will add further pain to homeowners already dealing with rising energy prices and grocery bills.
Ireland has approximately 200,000 homeowners on tracker mortgages who will feel the impact of today's increase immediately. The nature of the mortgage means the repayment rates move with the ECB rates. Today's increase combined with the two previous increases will add approximately €100 per month in extra repayments for each €100,000 borrowed.
Ireland's main mortgage lenders AIB, Bank of Ireland and Permanent TSB have yet to alter their variable mortgage rates. They have already absorbed the previously announced increases. However, it is just a matter of time before they increase these rates as the ECB plans further rate hikes with the next scheduled for December.
As the name suggests, those on fixed-rate mortgages will remain at their current interest rate until the fixed-rate mortgage period runs out. Earlier this month, AIB raised the rates on its fixed-rate mortgages by 0.5%. This will impact those seeking a new mortgage from the lender.
For any mortgage holder on a tracker or variable-rate mortgage, they have the option of switching lenders or moving to a reduced, fixed-rate product. The advice is to carefully examine the rate you are currently on and the time left on your mortgage.
On tracker mortgages, Joey Sheahan of MyMortgages.ie said holders should check their rates.
"If the mortgage holder has a low margin of 0.6/0.75%, then it could still be worth holding onto their tracker. However, for borrowers with higher margin trackers of say 1.25% and above, then giving up their tracker in favour of a fixed rate should be up for consideration."
The fixed rates offered by the main banks and non-banks are still attractive but the market is changing all the time. One of the country's biggest non-bank lenders Finance Ireland announced yesterday that it was withdrawing its 10-year and longer fixed-rate mortgage products due to the current volatility in the market.
Trevor Grant Chairperson Association of Irish Mortgage Advisors said the number of switching enquiries has mushroomed since the ECB first raised rates in July.
"We expect the number of people looking to switch out of standard variable rates, some tracker rates, and even some existing fixed-rate contracts with a relatively short period to expiry, to grow exponentially in the coming week and months," he said.