Mortgage interest costs rise more than 25% in year

HOMEOWNERS have seen the cost of their mortgages rise sharply in the last year with an average 250k mortgage repayment rising by up to €130 a month.

The latest inflation figures show a sharp rise in insurance costs and fuel prices.

The figures from the Central Statistics Office (CSO) show mortgage interest costs have risen by more than 25% in the year to the end of September following a raft of interest rate hikes by the country’s lenders. Homeowners have also had to deal with a 12.5% hike in home insurance costs over the last year as well as a 9% jump in health insurance.

Director of the Irish Mortgage Corporation, Frank Conway said that, if lenders persist on increasing interest rates outside of the ECB, then they will push arrears up.

“I think if all lenders increase their own standard variable rates by another 50 basis points before the ECB acts then you could be looking at the national arrears of 91 days passed due moving to 5.5%,” he said.

The rate is current at around 5%. Reacting to the rise, Karl Deeter, operations manager with Irish Mortgage Brokers, explained how the rises equate to an extra monthly mortgage repayment for many borrowers.

“Last year a person with a €250k mortgage over 25 years at 2.5% would have been paying €1,121 before TRS per month, but, with the banks aggressively raising rates, that has pushed through a 1% rise bringing that to €1,251 which is €130 of after-tax money per month or €1,560 per year. This is almost like having an extra mortgage payment to make.”

In further bad news for mortgage holders the ratings agency, Moody’s, said the total peak-to-trough decline in housing prices is expected to be 45%, leaving housing price at 2001 levels.

Overall consumer prices nudged up by 0.5% in the year to the end of September but the cost of living was down 0.1% on a monthly basis last month. This is the second month in a row that prices are up on an annual basis.

In the year, petrol was up almost 12% and air fares by 16%. Dental services also jumped by close to 9%.

However, food prices were down 2.2%, alcohol was down 8.7% and clothes prices fell 7.2%. Childcare costs plunged 11.2%.

Rent prices are also coming down and have fallen by almost 3% in the year.

On a monthly basis clothing and footwear prices were 4.5% higher in the month following the end of the traditional summer sales. The increase was possibly also due to cotton prices, which have climbed steadily since reaching a low in April 2009, according to analysts.

Businesses, however, are not happy with the increased cost of utility services such as housing, water, electricity and gas.

Director of the Small Firms Association Avine McNally said: “The figures show that costs in some sectors are too high and need to come in line with our competitors.

“Cost competitiveness remains a major challenge for small firms and it is critical for their survival that these costs are brought under control.”