Experts have described the hike as “substantial” and said many struggling mortgage holders will not be able to afford the increase.
The bank is increasing its standard variable rate by 0.6% to 4.95% from July 1 following a review.
This is the second interest rate hike from Ulster Bank this year. On March 1 it increased rates by 0.5%. This means that those on a €300,000 mortgage will have seen their mortgage repayments increase by almost €200 since the start of the year.
This news comes as experts predict that the European Central Bank (ECB) will increase rates in July. The ECB already hiked rates from their record low 1% earlier this year and some experts say that two more hikes could be on the way this year.
Director of the Professional Mortgage Brokers Association (PIBA), Rachel Doyle said the hike is “unwelcome but hardly surprising” given that we’re in an upward rate cycle that is likely to continue for the foreseeable future.
She said variable mortgage holders in particular need to “constantly and urgently review their situation.” “They need to factor in the likelihood of double increases over the course of this year alone — a number of ECB increases and most likely consequent and separate increases by their lenders.
“They then need to urgently look at the fast disappearing good value long-term fixed rates for periods of five years or longer, make the comparison and arrive at a decision,” she said.
Ms Doyle said 2011 and 2012 are going to be very difficult years for mortgage holders. “The upward rate cycle is happening at a time when people are already under severe pressure with higher taxes and many with reduced incomes,” she said.
Irish Brokers Association CEO, Ciaran Phelan, said: “The increases are substantial and will simply not be affordable for many people. If the ECB also increases its rate towards the end of the year, as predicted by some experts, some variable mortgage rates could hit 6%. With over 25,000 families in long-term mortgage arrears, allowing the banks to increase the profitability of their captive mortgage clients is untenable.”