Soaring costs | 

Mortgage rates hit three-year high with more hikes on the way

Stock pic© Getty Images/iStockphoto


Mortgage interest rates in this country shot up to a three-year high in January as lenders imposed a string of rises in response to higher European Central Bank rates.

But despite the rises the interest charged on borrowings for a home remain the third lowest in the Eurozone, according to the latest figures from the Central Bank.

The home-loan lending rate here is below the Eurozone average for the fourth month in a row.

However, there are predictions that the average rate is to surge in the coming months with the European Central Bank due to deliver another body-blow to borrowers on Thursday with its sixth rate rise since the summer.

The average lending rate on a new mortgage in January was 2.93pc. up from 2.69pc in December.

This means rates here are at their highest level since October 2019.

There has been a spate of increases in lending rates from AIB, Bank of Ireland, Permanent TSB, Ulster Bank, Avant Money, ICS Mortgages and Finance Ireland.

But despite the big jump, Ireland continues to have among the cheapest mortgage rates in the Eurozone, for now.

Only France and Malta had lower rates than Ireland in January, the Central Bank said.

Eurozone average rates rose to 3.16pc, well over double the rate compared to this time last year.

Daragh Cassidy of price comparison site said over the past few months all the lenders have hiked their mortgage rates in response to increases by the ECB.

And these hikes are now beginning to show up in the Central Bank monthly figures.

“Initially the banks were slow to pass on the ECB rate hikes but this is now starting to change. And the average rate will shoot much higher over the next few months.

“Looking forward things don’t look great for those on trackers, variable rates or people who are looking to buy over the coming months.”

Mr Cassidy said the ECB is almost guaranteed to hike rates by another 0.50 percentage points next week, and by at least another 0.25 percentage points before the end of this summer.

This will take the main lending rate to 3.75pc, though it looks increasingly likely that it will go even higher. This means yet more rate increases from all the lenders are guaranteed over the coming months, he said.

This week borrowers were warned that mortgage rates are heading for levels not seen for decades.

The warning comes after Permanent TSB increased its fixed rates for the third time since the summer, while the European Central Bank ( ECB) is due to again increase its key lending rates next Thursday.

Permanent TSB increased its fixed rates by 0.75 percentage points this time. Fixed rates for a standard first-time buyer will now be more than 4.5pc.

Rates for those wanting to lock in are now heading to 5pc, said leading mortgage broker Michael Dowling. It is nearly 20 years since mortgage rates were this high.

This time last year, existing borrowers and new buyers were able to lock in at fixed rates as low as 2pc.

A move to 5pc for fixed rates would add €500 to the monthly costs for borrowers, or €6,000 over a year, when compared with last year.

Higher fixed rates will make purchasing a home unaffordable for many more would-be first-time buyers.

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