Mortgage holders urged to fix terms

HOMEOWNERS should fix mortgage rates immediately to avoid getting stung if banks increase interest rates, according to banking analysts.

There are an estimated 100,000 people on standard variable mortgages (SVR) but brokers say many of these will have the option of switching to a fixed rate mortgage at some of the lowest rates ever seen in the market.

Banks are tipped to follow Permanent TSB’S lead and increase interest rates for those on SVR mortgages despite no planning rate hikes from the European Central Bank (ECB).

Associate director at Financial Engineering, James Maguire said: “The banks are doing so much less business but the demands to make profit are still as high as always.

“Rates are at an all time low and the quickest way a bank can increase profit is to begin increasing rates,” he said.

Many brokers have been recommending to people for the last few months to start looking at fixed rates.

“If banks start to increase rates you will miss the opportunity to fix your mortgage. People on a variable rate should really be looking at fixing rates at this point,” added Mr Maguire.

Between 2003 and October 2008, the variable mortgage market was dominated by tracker mortgages, which are immune to the decisions of individual banks.

Only the movement of the ECB base rate of lending has a direct impact on tracker mortgages. However over the last year banks have pulled back from offering tracker mortgages following a raft of ECB rate cuts.

Director of the Irish Mortgage Corporation, Frank Conway said consumers continue to have a choice.

“There continues to be some excellent fixed rate value available. I would advise anyone who may have concerns about the possible implications of mortgage repayments increasing to consider the merits of locking into a fixed rate deal,” he said.

Also yesterday the chief executive of the EBS Building Society Fergus Murphy said the cost of the new Government bank guarantee will be much more expensive than the old one.

He said this, combined with the higher cost of deposits, would put more pressure on bank profit margins and could lead to upward pressure on standard variable mortgages or SVRs. But he said EBS had no immediate plans to put up rates.


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