Mortgage holders to feel the brunt of ECB hikes

Mortgage holders to feel the brunt of ECB hikes

On 3 February 2023 the European Central Bank (the "ECB") increased its refinancing rate by 0.5%. As a result, variable – rate mortgage holders and holders of tracker mortgages will see their repayments increase.

Tracker mortgages

This announcement from the ECB means that approximately 200,000 home owners with tracker mortgages will face an increase in their monthly repayments.

Darragh Cassidy, Head of Communications at Bonkers.ie stated that for those with €150,000.00 remaining on their mortgage, the increase by the ECB will mean an additional €35.00 be paid in monthly repayments.

The major banks were quick to alter their tracker rate in response. For instance, Bank of Ireland announced that its tracker mortgage rate will increase by 0.5% from 22 February 2023.

Variable-rate holders

Mr. Cassidy has also stated that "an increase of up to one percentage point for existing variable-rate customers is highly likely over the coming weeks".

Before the ECB announced the increase, Allied Irish Banks were charging a variable interest rate between 2.75% and 3.15% depending on the loan to value, whereas, Permanent TSB and Bank of Ireland were charging between 3.5% - 3.9% and 3.9% - 4.5% respectively. Allied Irish Banks, however, have in response decided to increase its fixed mortgage rates from February 2023 and will increase its variable mortgage rates by 0.35% from 14 March 2023. This increase is likely to be mirrored by the other major banks in Ireland in the coming weeks.

There is speculation that the ECB are likely to increase rates even more when they next meet in March with Governing Council President Christuine Lagarde stating "the ECB will stay the course in raising interest rates significantly at a steady pace and in keeping them at levels that are sufficiently restrictive to ensure a timely return of inflation to 2% medium-term target".