Four hikes in mortgage rates on way this year
500,000 to be hit after ECB warns first rise could come next month
HOMEOWNERS face up to four interest rate hikes by the end of the year.
Economists gave the stark warning last night after the European Central Bank (ECB) confirmed it could raise rates as early as next month.
The move means more than 500,000 mortgage holders face the prospect of higher monthly repayments.
A rise of 0.25pc in ECB rates would add around €45 to the monthly repayments on a €300,000 mortgage.
ECB president Jean-Claude Trichet shocked markets when he said the ECB rise was needed sooner than expected to fight accelerating inflation pressures.
"An interest rate increase in the next meeting is possible," he said in Frankfurt.
Europe's most powerful banker stressed that the ECB's governing council, which includes our own Central Bank governor Patrick Honohan, would not make a definite decision on interest rate moves until it meets in early April.
But yesterday's comments mark the strongest signal yet that the ECB is preparing for an immediate interest rate hike, to tackle the wave of inflation that could be triggered by rising commodity and oil prices.
Up to now, a rate rise had not been expected until September at the earliest.
It will heap more pressure on the new government as it attempts to ease the country's €85bn bailout burden.
Fine Gael leader Enda Kenny and Labour leader Eamon Gilmore will today attend meetings of EU leaders in Helsinki and Athens. Mr Kenny is expected to talk to German Chancellor Angela Merkel at a conference of the European People's Party.
The Taoiseach-elect's hopes of easing the €85bn bailout burden were dealt a blow when Ms Merkel virtually ruled out lowering the crippling interest rate.
Consumers also face soaring food and oil prices. Prices started to nudge upwards last month with significant increases for tea, lamb, eggs, fruit and fish.
And consumers have been warned not to expect any major price war after the deregulation of the ESB is announced today.
A eurozone rate rise in April will impact on 80pc of mortgage holders.
Economists last night warned a series of rate rises are now on the cards, with a strong possibility of the ECB base rate hitting 2pc by the end of this year. This would mean four separate rises of 0.25pc this year alone.
Rises in ECB rates will hit up to 400,000 people who have tracker mortgages, as these rise or fall when the rate moves. Up to 200,000 people on standard variable rates will also be hit as any rise will be passed on to these borrowers.
Some 80,000 homeowners are already struggling to meet repayments. This is despite the fact that the ECB has kept its key rate at the emergency rate of 1pc for two years.
The bad news on mortgages comes days ahead of a full 1pc rise in Permanent TSB's variable interest rates. It is pushing its standard variable rate up to 5.19pc from Monday.