Mortgage time bomb Ireland: Warning to fixed-rate loanees as massive ECB rate rise looms & More News Headlines


Moves by the European Central Bank (ECB) to implement a jumbo interest rate rise this week have led to warnings that some homeowners on fixed rates need to break out of them.

ortgage holders on either variable or fixed rates with less than two years to run need to act now – otherwise they will be hit by huge repayment hikes, research for the latest Irish Independent Mortgage Switching Index has found.

A family who wait until their current fixed rate runs out in two years could end up paying €1,500 more a year to lock in for a new five-year rate.

People rolling out of historically low fixed-term contracts in the next few years face immediate rate rises of more than 1pc, according to mortgage expert managing director of Martina Hennessy.

The ECB shocked mortgage holders last month when it pushed up rates by a higher-than-expected 0.5pc.

Runaway inflation means the ECB is now likely to announce a second hike of 0.75pc on Thursday. This will automatically push up the cost of tracker rates.

The three main banks did not pass on last month’s rate rise to variable-rate customers, but are expected to this time.

And all new fixed rates are expected to go up.

Ms Hennessy said a family on a five-year fixed rate of 3pc, with two years to go, need to look at their options and consider whether exiting their fixed rate early and locking in again now makes sense.

With the lowest five-year fixed rate currently at 2.5pc, by the time the family comes to the end of the fixed period, the best five-year rate will probably be 3.5pc.

They would end up paying an extra €130 a month to lock in for a new five-year rate. Over a year, this would cost an extra €1,500 in repayments. This is based on a €250,000 mortgage, on a 25-year term, with an 80pc loan-to-value ratio.

Ms Hennessy said break penalties, for coming out of a fixed rate early, have reduced radically in the last nine months, with no penalties being charged by many lenders.

Mortgage switching activity has surged, with approval volumes increasing year on year by 153pc and the numbers switching mortgage now double that of four years ago.

“There are two certainties – we are in for a period of sustained rate increases, and the pillar banks, who have some of the highest rates on the market, will soon implement rate increases,” said Ms Hennessy.

“The vast majority of mortgage holders will not have felt any effects from recent rises as they are with AIB, Bank of Ireland or Permanent TSB, who have not moved their rates.

“If you are on a variable rate, unless you plan to pay it off in the immediate short term, you need to act now and fix your rate to avoid imminent rate increases.

“Even a phone call to your bank will save you 1pc immediately, and several percentage points a year down the road.”

The only people that rises won’t immediately hit are those on medium-term fixed rates, Ms Hennessy said.

“For people with one year left to go, next year will be a big concern as they will be coming off historic low rates and affordability may become an issue in light of overall cost-of-living increases being experienced,” she said.

“Our advice would be: don’t wait until next year – now is the time to revisit your mortgage to lock in your next fixed rate rather than waiting for your rate to expire.”

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