Anyone with a tracker mortgage could face a hefty 0.5 percent interest rate which will lead to increases in repayments.
The increase is set to hit the pockets of approximately 300,000 Irish mortgage holders who are currently on tracker rates. For example, those with a €250,000 mortgage - which is the average mortgage in Ireland - will have to pay an extra €696 per annum.
Martina Hennessy, Managing Director of digital mortgage platform doddl.ie said: “The ECB has chosen to accelerate interest rate increases with the announcement of a bigger hike than expected. This increase of 0.5 per cent is not good news for tracker mortgage holders who will have one month before seeing an increase of €23 per month for every €100,000 owed over a 25 year term.
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“For a mortgage of €250,000 - which is the average mortgage in Ireland - that’s an extra €696 a year. It’s expected that variable rates will also rise in the near future, while those on short-term fixed rates will eventually feel the pinch when they roll out of lower fixed rates into a higher rate environment.”
Anyone on a short-term fixed rate will feel the pinch when they roll out of their lower fixed rates as it’s likely that variable mortgage rates will also rise in the near future.
“For these, I would advise checking if there is a penalty to break out of your current fixed rate if you want to lock in for longer. Rising funding costs for mortgage lenders continue to pose a threat to mortgage rates in general, with upward movement on rates announced by a number of lenders in the last two months and more expected.
“With many aware of imminent rate increases, mortgage switching is at an all-time high as people seek to secure more long term, low cost and flexible fixed rates. Fixing your mortgage is the only way to have security over rising interest rates.”
Most of these customers with tracker mortgages will see increases as soon as August 10, 2021.
Who will be impacted?
Bank of Ireland will not be passing the ECB's 0.5% increase in interest rates on to its variable rate mortgage customers. Their fixed rate customers will also not be impacted. Permanent TSB also confirmed that it would not be passing the ECB rate increase on to their fixed and variable rate mortgage customers.
AIB and Ulster Bank customers with a tracker mortgage linked to the ECB rate will be contacted by their banks about changes to their interest rate. KBC also confirmed that any direct impact of rate changes triggered by the ECB will be communicated with customers.
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