Thursday 8 December 2016

Homeowners here among most exposed in EU to rising rates

Charlie Weston Personal Finance Editor

Published 29/07/2010 | 05:00

IRISH mortgage holders are much more vulnerable to rising interest rates than homeowners in other EU countries, new research reveals.

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Some 85pc of existing mortgages in this country are variable-rate mortgages -- either trackers, or with a standard variable rate. This means that around 674,000 mortgage holders are at risk from higher interest rates. Only 15pc of mortgage holders here have opted for fixed rates. This works out at 117,000 mortgage holders.

This compares to other European countries where larger numbers of mortgage holders opt for the safety of fixed-rated mortgages, a survey by the European Mortgage Federation shows.

Around a quarter of German mortgage holders have fixed for more than 10 years. In Ireland, just 2.3pc of those with a mortgage have fixed for five years or more. Around a third of Belgians opt for a fixed rate that lasts the length of the mortgage. This kind of product is not available in this market.

Mortgage brokers said the Irish attachment to variable-type mortgages was unusual.

"The figures mean Ireland is one of the most rate-sensitive mortgage markets in Europe," Frank Conway of Irish Mortgage Corporation said.

The vulnerability of Irish mortgage holders was thrown into sharp focus when Permanent TSB last week increased the interest rate on its standard variable rate mortgages for the third time in a year.

EBS Building Society hiked its standard variable for the second time two weeks ago.

Other lenders are now set to follow with their second hikes in standard variable rates, while the European Central Bank (ECB) could move as early as next summer to push up its key rate from an all-time low of 1pc.

An ECB hike would mean both standard variable and tracker mortgage rates rising.

Mr Conway said interest rate increases announced by Irish banks since July 2009 flew in the face of continuing economic hardship and rising mortgage arrears.

"There is little evidence to suggest that lenders have assessed the economic situation of its customers as well as their ability to absorb rising mortgage costs," he said.

Mortgage arrears statistics from the Financial Regulator show that over 32,000 mortgage holders are now more than 90 days in arrears.

"While there is no direct evidence that increase to standard variable rate mortgages have resulted in rising incidents of arrears, the timing of increased arrears in tandem with rising mortgage costs is undeniable," Mr Conway added.

Fine Gael TD Terence Flanagan claimed there was a lack of clarity on the mortgage arrears situation, and that it was time for the Financial Regulator to take control of the situation.

"Currently, mortgage arrears data is being reported to the public on a quarterly basis, two months in arrears. This is totally unacceptable when you consider that the Irish Credit Bureau has complete real-time information on mortgage, personal loan and credit card arrears, yet the public is being kept in the dark by not being provided with complete or timely information," he said.

Irish Independent

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