Sunday 19 February 2017

255,000 households now paying sky-high mortgages

Charlie Weston Personal Finance Editor

Published 15/12/2011 | 05:00

New figures show that more than 255,000 households have expensive variable mortgages. Photo: Getty Images
New figures show that more than 255,000 households have expensive variable mortgages. Photo: Getty Images

FAR more borrowers are feeling the squeeze from sky-high variable mortgage rates than previously estimated

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New figures show that more than 255,000 households have expensive variable mortgages.

That is 55,000 more than previously estimated.

Banks are obliged to automatically pass on European Central Bank (ECB) rate cuts to those with tracker mortgages.

But there is no legal requirement to pass on ECB rate cuts to those with variable deals.

Variable rates have shot up this year and last. Some lenders are charging interest rates on variables that are twice as high as those charged by their competitors, and much higher than tracker rates.

And four banks - Ulster Bank, KBC Bank, National Irish and AIB--- refused to pass on this month's ECB cut to their variable rate customers.

Figures from the Central Bank, issued yesterday, show that households on variable rates now represent around a third of all residential mortgage holders. The figures also show that 410,000 residential mortgage holders have tracker rates.

Just 131,481 -- or 17pc -- of residential mortgage holders are on fixed rates, the Central Bank figures show, with most locked in for between one and three years. Mortgage market experts said large numbers of households on fixed rates would have locked in following two ECB rate rises this year.

There had been expectations earlier in the year that eurozone rates would continue to rise.

However, in November and December, the ECB performed a U-turn and cut rates; with another decrease expected in early January. Bank of Ireland passed on just 0.15pc of this month's ECB cut to variable customer and refused calls from the Taoiseach and Tanaiste to pass on last month's eurozone decrease.

AIB did not pass on this month's ECB rate cut, but argued that it did not need to, as it has the lowest variable rate in the market and it reduced its rates in November. Permanent TSB -- which has the highest variable rates -- said last week it was cutting its variable rates by up to 0.71pc in response to this month's ECB cut.

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Despite reducing its variable rates, Permanent still has the highest variable rates at 5.19pc.

Even after the variable rate cut, a customer with a €300,000 Permanent TSB mortgage will be paying €366 a month more than someone with a similar-sized AIB variable rate mortgage.Some six out of 10 mortgages used to fund buy-to-let investments are on tracker rates, the Central Bank data shows. It is estimated that around 100,000 people own a second property with a further 35,000 owning three or more properties. Yesterday's figures from the Central Bank also show that the total deposits of households dropped by €4.5bn in the last year to €86.5bn.

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