The National Consumer Agency (NCA) issued a warning to consumers to “think carefully” before deciding to switch from a tracker to a fixed-rate mortgage.
This warning came as lenders are preparing to hike interest rates for those on standard variable loans. Permanent TSB is expected to increase rates either today or early next week by as much as 1%, which would add €200 a month to a €200,000 mortgage.
There are also fears that PTSB might stop offering fixed-rate mortgages to customers.
Once PTSB hike their rates other lenders are expected to follow suit.
Reports suggest banks are trying to tempt people off tracker loans and onto standard variable rates, which would be cheaper for the bank to operate.
The rate on tracker mortgages follow the European Central Bank (ECB) rate, which is at a record low of 1%. These are proving costly for the banks to run and they stopped offering them to homeowners last year.
The NCA said there are suggestions that banks are asking consumers to switch to fixed rates to protect themselves from interest rate increases.
Chief executive of the NCA, Ann Fitzgerald, said that while interest rates will inevitably rise at some point, tracker mortgages are a valuable product and are no longer available.
“You should think long and hard before giving yours up. We are concerned about the level of commentary on this topic and do not necessarily agree that the advice to switch to fixed rates is in the best interest of consumers with tracker rates,” she said.
The NCA said it has suggested to the Central Bank that where banks promote alternative rate options to tracker mortgage holders, they must be required to offer an independent review to consumers before any decision on switching is made.
Meanwhile, the Professional Insurance Brokers Association (PIBA) said there is little time left for mortgage holders to opt for good value long-term fixed interest rates.
Director of PIBA Mortgage Services, Rachel Doyle, said: “There is virtually no doubt at this stage that 2011 is going to be a year of rising interest rates. An immediate 1% increase is expected from permanent TSB and the ECB could raise its rate by 0.5% to 1% before the end of the year.
“Very quickly we will see the current better value long-term fixed rates rising,” she warned.