Homeowners face interest rate hike

HOMEOWNERS are facing the spectre of mortgage hikes as banks plan a raft of interest rate increases to claw back losses.

Experts expect banks to increase rates on standard variable mortgages over the coming year, independent of the European Central Bank.

Permanent TSB has increased rates by 0.5% and EBS has said it too believes rates will have to go higher.

A 0.5% hike from 3% on a €200,000, 30-year mortgage would cost an extra €54.88 per month or €658.56 a year. A 0.25% hike based on the same criteria would mean an extra €27.20 a month or €326.40 a year.

Although AIB said it has “no plans” to raise interest rates, it is planning to raise €2 billion. Bank of Ireland said it has “no immediate plans” to increase rates.

EBS said, however, that it believes interest rates for variable mortgages will have to go higher.

Chief executive Fergus Murphy said EBS was doing all it could to keep rates low but said similar charges in France, Germany and Britain were 50% higher than in Ireland.

Chairman of the finance committee at the Irish Brokers Association, Paul Kinane said: “EBS like other mortgage lenders appears intent on ensuring that its mortgage customers pay for the mistakes of management with increased interest charges on their mortgage.”

Director of the Irish Mortgage Corporation, Frank Conway said banks have been working to take back the control over interest rates given away during the tracker mortgage years.

“They have been regaining control by removing tracker mortgages and replacing them with standard variable rate deals.

“During the height of the credit crunch, which peaked in mid-October 2008, many banks realised how seriously they were exposed to interest rate fluctuations and suffered significantly as a consequence.”

Homeowners were urged to consider fixing their mortgage. “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,” Mr Conway added.


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