Responding to the ECB interest rate increase of 0.75 percent, Brokers Ireland said even though predicted by some commentators the fact that it is on the higher side is very disquieting for consumers with the real worry now being the unknown one of how long such increases will go on for and what level they will reach.
“The unfortunate thing is that if there is a new cycle of interest rate increases, they will be coming on top of a whole host of other increases for home owners, particularly in energy.
“If there is a positive it is that there are still good long-term fixed interest rates in the market, rates that historically were never as good as they are now. In fact, it is only in recent years we’ve seen truly long-term fixed rates,” Rachel McGovern, Director of Financial Services at the organisation which represents 1,225 Broker firms, said.
However, she warned the window to take advantage of them may be closing.
She advised mortgage holders who have not reviewed their situation to do so immediately and take professional advice.
“Long-term fixed interest rates mean that people can plan their financial affairs knowing what their outlay will be over the longer-term, for periods up to 20 and 30 years,” Ms McGovern stated.
She said those on standard variable rates, those on short-term fixed rates which typically in Ireland were for periods of between three and five years and those on higher rate tracker mortgages should all be encouraged to review their position.
“As the months go by these rates, which have been reducing in recent years, are likely to increase. They cannot increase for the period of the agreed fix if you have already fixed but it would impact new mortgage holders,” she added.
And she said 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 increasing interest rates are likely to benefit 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 commented.
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.
