Mortgage holders in Ireland will face an additional cost blow over the coming months as the European Central Bank (ECB) opted to hike the mortgage interest rates once again. The impact of rising interest rates on mortgages was a mere 0.5% but will cost the average tracker mortgage holder around €1,650 extra each year (ie approx. €137.50 per month). The ECB base rate now stands at 3.00%, a full 3 percentage points above where it was over 15 months ago.
It is expected that there will be at least 2 more interest rate hikes in the coming months, which take out the most common question “Are mortgage interest rates going up or down?”, as the ECB bids to stave off inflation. The only silver lining is that eurozone inflation has started to fall after hitting a peak of 10.6% last October, even though prices excluding energy are still growing a steady pace.
This latest interest rate increase will not just hit the pockets of tracker mortgage holders, as the expectation is that the hikes will be passed on to both variable and fixed rate mortgage holders in due course. Of course, fixed rate mortgage holders will be insulated from any rate hikes until such time as their current fixed rates expire. That’s good news for those who fixed their rates at any time up to the end of 2021 (where 5 year fixed rates were as low as 2.50%) as they are “locked-in” until possibly the end of 2026.
Of course, the bad news for mortgage holders is that along with the mortgage interest rates their monthly repayments are also increasing, but so too is the total amount of interest that they will pay over the lifetime of the mortgage. So, for example, a borrowing of €200,000 at a notional fixed rate of 3.00% over 20 years will cost €1,106.43 per month, which is the equivalent of €65,543.20 in interest payments. If this borrowing started off at a notional rate of 4.00% per annum over the full 20 years, then the monthly repayments would increase to €1,207.94 per month, which is the equivalent of €89,905.60 in interest repayments ie an additional €24,362.40 or €1,218.12 per annum.
So, what are the options for mortgage holders who are facing the prospect of further interest rate hikes:
There is certainly a lot to consider but the big takeaway is that borrowers need to start dealing with the reality of rising interest rates. It is vital that you understand the important details of your existing mortgage ie amount owing, value of your property, term remaining, current repayment amount and rate, as well as what rate(s) you are being offered. Once you have these details, you will be in a good position to assess your options.
If you feel you need some specific mortgage advice on this matter, contact us at 061-337578 or email email@example.com.