Warning for 70,000 homeowners who are rolling off fixed rates this year

Thousands of tracker mortgage holders are set pay more after the European Central Bank raised its rates today.

The move to increase key European Central Bank (ECB) rates by 0.25 of a percentage point means that 120,000 tracker holders will have been hit twice in the past three months.

The latest rise in ECB rates means a couple with €150,000 remaining on their tracker over 10 to 15 years will to pay an extra €18 a month, or just over €200 a year.

This is on top of a similar increase in June, giving rise to an additional €400 in mortgage repayments over a full year.

Mainstream lenders, including AIB, Bank of Ireland, PTSB and Avant Money/Bankinter, did not increase variable rates or new fixed rates on the back of June’s rise.

But mortgage experts said there was a fear they may react to this rate rise by imposing higher new fixed and variable rates.

Some 70,000 homeowners are rolling off fixed rates this year, and have been advised to look at their options now, instead of waiting till the fixed term ends.

ECB governors are attempting to control inflation, which is rising on the back of the conflict in the Gulf, by making borrowing more expensive.

Financial markets have priced the possibility of at least one additional ECB rate increase after this week’s one. But some economists are not convinced the Frankfurt-based central bank will move again for a while.

Markets are increasingly concerned that higher oil, gas and transportation costs could eventually spread beyond energy and create broader inflationary pressures.

At 3.3pc, inflation in the Eurozone is well above the ECB’s 2pc target.

However, some experts have questioned how effective higher interest rates will be in bringing inflation back under control.

This may limit the ECB’s appetite to hike rates much more.

Anyone on a tracker mortgage will feel the impact almost immediately, said Daragh Cassidy of broker and price comparison site Bonkers.ie.

He said these borrowers will see their mortgage rate increase by another quarter of a percentage point within the next month or so.

Tracker mortgages are linked to the ECB’s slightly higher main refinancing rate, which has risen from 2.40pc to 2.65pc.

“For someone with €150,000 remaining on their tracker over 10 to 15 years, their repayments will increase by another €17 or €18 a month, or just over €200 per year.

“So they’ll now be paying over €400 a year more when you include the June hike.”

He said anyone on a tracker who is paying a margin of 1pc or less is still getting a fairly good deal.

The latest hike in ECB rates is unlikely to mean the banks in this country increase deposit rates for savers, said Eoghan O’Hara, country head Ireland of Berlin-based Raisin Bank.

Savers need to take active steps to look around for the best option and move their money to accounts that pay better returns.

“June’s rate hike offered virtually no gain to the majority of savers. According to the latest retail interest rate data from the Central Bank, cash left in standard demand accounts was earning a meagre 0.15pc AER [annual equivalent rate] by July.”

Far better rates are on offer, especially on term deposits, Mr O’Hara said.