Home Real Estate Mortgage interest rate hikes Ireland: Borrowers should prepare for a new cycle of mortgage hikes by the main banks

Mortgage interest rate hikes Ireland: Borrowers should prepare for a new cycle of mortgage hikes by the main banks

by Ozva Admin

Banks are about to embark on a cycle of further mortgage rate hikes, borrowers have been warned.

Bank of Ireland announced yesterday that it would raise its new fixed rates by 0.25 percentage points effective immediately. This followed a 0.5 percentage point increase from AIB to its fixed rates.

The permanent TSB is expected to announce higher fixed rates of between 0.25 and 0.5 percentage points as soon as next week.

Trader Michael Dowling said banks were taking a “soft-soft” approach to rate hikes at the moment, but the pace of hikes will start to pick up in the coming months.

Dowling said the top three banks could not hold out much longer after the European Central Bank (ECB) rate rose to 2% after three record hikes since the summer.

The top three banks are able to absorb the ECB’s higher lending rates for now as they hold millions of euros in deposits from households.

They are paying depositors little or no interest on these, but the ECB pays them 1.5% for leaving these funds with it.

But Dowling said pressure will be on banks to start giving savers decent returns.

“If banks have to pay savers higher rates, they will have to recoup the money by imposing higher mortgage rates,” he said.

This would mean that the current “soft-soft” approach to raising mortgage rates would change and the pace of mortgage rates would pick up.

“There is no doubt that the rate of increase in mortgage rates will accelerate,” he said.

The ECB has imposed three jumbo hikes on its key refinancing rate, with another mega hike likely next month, with another hike likely in June.

Central Bank Deputy Governor Sharon Donnery confirmed this yesterday, when she said consumers should brace for further interest rate hikes, particularly if energy costs or wage demands push prices higher.

“What is clear at the current juncture is that our current cycle of rate hikes still has some way to go,” he said in a keynote address to the Nevin Economic Research Institute.

It also warned that “gas supply cuts could further increase wholesale prices, including by winter 2023.”

While the central bank believes inflation will ease next year, an energy supply shock or rising wage demands could keep inflation high for longer, Donnery said.

His comments came as the Bank of Ireland will increase the interest on its fixed-rate mortgages for new customers by 0.25 percentage point.

The new Bank of Ireland rates will take effect immediately for new borrowers and exchangers.

It means that the bank’s featured rate of 1.9% for those who borrow more than €400,000, with no cash back, will increase from 1.9% to 2.15% for new borrowers and money changers.

However, the new fees will not affect existing BoI customers who are reaching the end of a fixed fee.

They will still be able to fix the rates in force before the last increase.

There is no increase in variable rates.

Tracker clients automatically face increased interest in line with the three record hikes announced by the ECB in the last four months.

The move comes after AIB raised its fixed rates by 0.5% in recent weeks.

The Bank of Ireland will allow those who already have approval for a new mortgage to get the rates in force so far, provided they withdraw them before December 9.

This move to give those in the process of getting, or switching to, a new mortgage a four-week notice is in line with what AIB did.

It comes after Finance
Ireland was heavily criticized for initially announcing a rate increase that affected those in the process of withdrawing a mortgage.

Bank of Ireland customers with existing fixed rates will not be affected by the latest rate hikes.

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