Interest rate hike fears as EBS raises variable charges

A SECOND raft of interest rate increases could be on the way for homeowners as EBS adds an extra €100 a month to a €300,000 mortgage.

The lender is hiking rates on standard variable (SVR) loans from the start of next month.

Brokers have expressed fears this is the start of the second wave of rate increases by the country’s lenders.

EBS will increase its SVR mortgage rate by 0.6 points from 3.23% to 3.83% and it is blaming the increased cost of funds on international markets. It said this means that it is still charging less to members than it is paying for funding.

It added that a previous increase by the society did not close the gap that exists between its variable rate and the rates that it is paying on the open market.

Director of membership business with EBS, Dara Deering, said: “Unfortunately, as there has been no relief in the cost of funds to EBS this further increase is required.”

On May 1, EBS also raised its rate by 0.6 points, from 2.63% to 3.23%.

According to the Irish Mortgage Corporation the change will result in mortgage repayment increasing by over €100 on a €300,000 mortgage. It will increase by €67 on a €200,000 mortgage.

Managing director of the Irish Mortgage Corporation, Frank Conway, said he is concerned that this is the beginning of round-two for lenders increasing the rate of interest they charge existing SVR customers who hold such mortgages.

“It will represent a big blow to struggling mortgage holders. Over the past 12 months, mortgage arrears have exploded and it is likely that this rate increase will add to the growing arrears problem,” he said.

Permanent TSB and AIB were the first to move on interest rate hikes earlier this year with Bank of Ireland and EBS following their lead shortly afterwards.

Such moves will only affect those on SVR loans while mortgage holders on tracker products should not expect any rate increase until late next year as their rates track the European Central Bank (ECB). The ECB has signalled it will not be increasing rates any time soon with some analysts believing a rate hike may not come until early 2012.

Irish Brokers Association chief executive Ciaran Phelan said: “EBS, like other mortgage lenders, appear intent on ensuring that its mortgage customers pay for the mistakes of management with increased interest charges on their mortgage. There’s absolutely no need to simply fleece mortgage customers in this manner – financial institutions in need of capital should first look to reduce their huge overheads before tapping their customers.”

Responding to the announcement, Rachel Doyle, director of PIBA, the country’s largest group of independent mortgage and insurance brokers said anyone, other that those on tracker mortgages, should review their rates and consider fixing at a good long-term rate, if they have not already done so.

“This should leave consumers in no doubt whatever as to what the future holds. Both variable and long-term fixed rates are on the rise, so delaying a decision may be costly,” she said.

However, Ms Doyle advised that people should generally not fix for periods of less than five years.


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