Advice for Homeowners: Prepare for Increased Repayments as Fixed Rates Expire

According to Daragh Cassidy of Bonkers.ie, homeowners should consider refinancing their mortgages, as the current rates they are paying are much lower compared to the rates they will get when they refix. Cassidy explains this in light of the recent increase in key lending rates by the European Central Bank (ECB), which has reached its highest level in more than two decades. The ECB has raised its refinancing rate to 4.25%, marking the ninth rate rise since last July. However, there is hope that this may be the last rate hike, as the European economy is showing signs of a slowdown and potential recession, which is expected to reduce inflationary pressure. ECB president Christine Lagarde has stated that the bank’s future decisions will be dependent on economic conditions. This latest rate increase will affect tracker rates, raising them to 5.25% and adding €12 per month to repayments for a family with €100,000 remaining on their mortgage. It is anticipated that banks will also increase new fixed rates in response to the ECB’s actions.

With fixed rates currently ranging between 3.75% and 5.5%, Cassidy projects that lenders will further increase fixed rates in the coming weeks, potentially exceeding 5% by year-end. This contrasts sharply with rates of just 1.9% a year ago. Bank of Ireland, for example, has raised its fixed rates four times in the past year. Approximately 60,000 mortgage holders are expected to reach the end of their fixed rate this year, with an additional 70,000 fixed rates expiring next year. The full impact of the ECB rate rise, if passed on by banks, would mean an increase of €45 per month or €540 per year on a typical first-time buyer mortgage of €300,000. Homeowners on fixed rates are advised to start budgeting for higher borrowing costs, as typical fixed rates are projected to reach 5% by year-end. Notably, all nine rate increases by the ECB have been passed on to those on tracker rates. Although trackers were previously the best rates in the market, the number of homeowners on tracker mortgages has halved as they have switched to fixed rates. Trackers are still held by around 120,000 individuals, typically with more than €100,000 and 15 years remaining on their mortgages. It is important to mention that banks stopped offering trackers 14 years ago.