Mortgage holders to seek professional advice on current market interest rates - Brokers Ireland

Responding to the ECB interest rate increase of 0.5 percent, Brokers Ireland said it “marks the beginning of a new era and predicting where the rate will end up with any degree of accuracy is like fortune telling.”

“Ten years ago hardly anyone believed or foresaw that the ECB interest rate would drop to zero as it did in 2016 or that it would maintain at this level until now.

“We are not in the business of fortune telling and mortgage holders and aspiring mortgage holders have to live their lives and make decisions now in this increasingly uncertain world.

“Therefore, our advice to mortgage holders who have not reviewed their situation is do so immediately and take professional advice. There are still very good long-term fixed interest rates in the market, which mean that people can plan their financial affairs knowing what their financial outlay will be over the longer-term, for periods up to 30 years,” Rachel McGovern, Director of Financial Services at the organisation which represents 1,225 Broker firms, said.

She said as the months go by these rates, which have been reducing in recent years, are likely to increase.

“Of course they cannot increase for the period of the agreed fix if you have already fixed but it would impact new mortgage holders,” she said.

And she stated that an unfortunate aspect of increasing interest rates is that it will impact aspiring home buyers, especially those on average incomes, who will now have to plan for increased repayments and the likely higher stress testing by lenders.

Ms McGovern said if there is a positive side to increasing interest rates the benefits are likely to rest with deposit holders.

“Perhaps it may take some excess out of house price increases but with supply still lagging demand to a considerable degree it is questionable as to what degree that might happen,” she remarked.

She said today’s ECB rate increase will mean an automatic increase for anyone on a tracker mortgage. Although no tracker mortgages have been issued since 2008 over 200,000 people will see the 0.5pc increase applied to their monthly repayment.

If someone is on a tracker mortgage rates of 1.1 percent, this change by the ECB would mean an increase of €71 to their monthly repayments.

She said we don’t know as yet how lenders are going to respond in respect of those on standard variable rates, whether or not they would apply the increase.

“If lenders were to apply the full rate for someone with a €300,000 mortgage over 30 years currently on a standard variable rate of 2.3 percent, the 0.5 percent increase bringing the rate to 2.8 percent would mean a monthly increase of €78.28 and a yearly increase of €939.36, amounting to €28,180.80 extra in repayments over the full 30 years,” she said.


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