Permanent TSB tipped to follow Bank of Ireland and AIB in hiking fixed-rate mortgages

It comes as Bank of Ireland announced that it is introducing a 0.25% rate increase for its fixed-rate mortgage products

Permanent TSB is the last remaining retail lender yet to increase its fixed interest rates.

Permanent TSB (PTSB) is widely expected to raise mortgage rates in the coming days following moves by Bank of Ireland and AIB to raise their fixed rates, according to a leading mortgage broker.

Permanent TSB is the last remaining retail lender yet to increase its fixed interest rates and is expected to raise rates by more than 0.25% as its rates are higher than those at Bank of Ireland, said Stephen Hamilton at MortgageLine brokers.

“We’re pretty surprised it hasn’t happened already,” said Mr Hamilton.

Bank of Ireland on Thursday announced that it is introducing a 0.25% rate increase for its fixed-rate mortgage products, following AIB’s decision to raise rates by 0.5% in recent weeks.

For a first-time buyer with a €300,000 mortgage, the hike will cost approximately €62.50 extra per month, or €750 extra per year, across their range of fixed rates, according to Mr Hamilton. Variable mortgages remain unchanged.

The bank said the new fixed rates were effective immediately and apply to customers who draw down new mortgages from the bank.

However, new customers who already have a written quote from the bank for a lower fixed rate, and who draw down a new mortgage by December 9, can avail of the lower rate up to that date.

Bank of Ireland's variable and tracker rates are not affected by this change. It means house hunters applying for a mortgage will face increased repayments compared to those on older rates.

Mortgage brokers have been puzzled in recent weeks that Irish mortgage lenders had initially held off hiking their fixed rates for new customers in the wake of the three increases in official rates by the European Central Bank since September. The interest rates paid for borrowers on tracker mortgages have risen automatically because they are tied to ECB ates. 

“It’s strange that Bank of Ireland have held off for so long as well,” said Mr Hamilton. “Although increases are not nice and no one likes them, it’s just the environment we’re in and it could have been a lot worse,” he added.

Mr Hamilton said he would not be surprised if Bank of Ireland “may have another look at it again in December or the start of January” as the European Central Bank hikes again to stifle inflation.

Non-bank mortgage lenders in the market, including Avant Money and Finance Ireland, have also increased the cost of mortgage products in recent weeks. “It’s a horrible environment to be in and we have not been used to it in the last five to seven years,” said Mr Hamilton.

However, there were hopes that the European Central Bank and US Federal Reserve will not need to hike official interest rates next year as much as once feared. The interest rates, or yields, governments across Europe pay for their borrowings fell sharply on Thursday after the latest US inflation reading eased back.                                   

Central Bank of Ireland figures issued earlier this week showed the average rate on new mortgage agreements in September fell to 2.58% from 2.64% in August. In the same period, the equivalent eurozone rate rose by 19 basis points to 2.4%.