Irish tracker mortgage holders will be paying an extra 0.25 per cent from tomorrow after European Central Bank raised their interest rates today.
This is the the eighth successive ECB interest rate hike since last July when they began to respond to higher inflation, bringing the base deposit rate to 3.5 per cent
MyMortgages.ie Head of Credit Joey Sheahan told Dublin Live what the interest hike means for Irish mortgage holders: "This will have an immediate impact on tracker mortgage holders. This means that every tracker mortgage holder regardless of the margin of interest of paying, will be paying an extra 0.25 per cent tomorrow than what they were paying today.
"In the last year, the increase of 4 per cent in interest rates will directly affect every tracker, and if you take an average margin of 1 per cent, that means that tracker holders from tomorrow are going to be paying a 4 per cent plus 1 per cent margin, which is 5 per cent."
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According to Mr Sheahan, who is also the author of "The Mortgage Coach", presumably the banks will pass on this rate in time and it will eventually affect every mortgage holder. He said: "Since the start of the interest rate hike from last year, the Irish banks increased the rates across the board by about 2 per cent versus ECB increases of about 4 per cent.
"So there is the tension that the banks can increase it more. But my guess is that if people end up paying a rate of - we'll say 4.5 per cent to 5 per cent - [that] will be the highest set hours [they] will pay with the banks here. And that would be by the end of the year."
According to ECB's projections, a peak is now clearly in sight with headline inflation reaching average 5.4 per cent in 2023, 3.0 per cent in 2024 and 2.2 per cent in 2025. Mr Sheahan's also predicts rates will peak sometime in 2023 and they will stay at that peak until late 2024.
He added: "Hopefully, sometime after that they will begin to recede, albeit I don't think they will come back to the low levels that we've seen last year of 0 per cent interest, but maybe somewhere in between, maybe somewhere between 2 per cent and 3 per cent."
Mr Sheahan also stressed that there are alternatives out there that can help people take back that control into their own hands. He said: "I would say to every tracker holder and every mortgage holder in general to contact your mortgage broker like us, and we can shop around and tell you in a matter of minutes whether you can save money or not.
"It’s important to shop around to see, is your lender charging more than other lenders? [...] I’ll give an example based on a €225,000 mortgage outstanding, which is the average tracker mortgage outstanding according to a recent central bank survey.
"With a terminal of 15 years at an average margin of 1 per cent, by switching from paying 5 per cent to 3.6 per cent, this could save in the region €29,000 over the remaining 15 years on a mortgage."
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