Mortgage holders face three rate hikes this year
HOMEOWNERS face the prospect of a series of crippling interest rate increases after a key European Central Bank boss hinted strongly at three hikes this year.
Money markets expect the ECB rate to rise from 1pc to 1.75pc by the end of this year.
Influential European Central Bank governor Axel Weber, the outgoing governor of Germany's Bundesbank, yesterday said he would not disagree with the market view of where the eurozone's interest rate was heading.
Markets expect the rises to come in three separate 0.25pc hikes.
Last week ECB president Jean-Claude Trichet said the first rise could be as early as next month.
Three rises in eurozone rates would see the repayments on a €300,000 mortgage shoot up by €126 a month.
Some 400,000 homeowners have tracker mortgages, where the lending rate would automatically rise if ECB rates rise.
Another 200,000 mortgage holders have variable rate mortgages. Lenders have already increased these this year, with the expectation that any ECB rate rises would be passed on to all variable rate mortgage holders.
Mr Weber said the Frankfurt-based bank was embarking on a "normalisation" of interest rates. ECB rates have been at 1pc -- considered an emergency rate -- for almost two years now.
"I wouldn't do anything here to try to correct market expectations at this point," Mr Weber told Bloomberg News when asked about investors pricing in an increase in the benchmark rate to 1.75pc by the end of the year.
It was the intention of the ECB to bring forward market expectations and "I see no reason at this stage to signal any dissent with how markets priced future policies", he said.
Mr Weber stressed the ECB's mandate to tackle inflation in the 17-member eurozone. Oil price surges are putting pressures on prices.
Crude oil prices rose to the highest in 29 months in New York yesterday as escalating violence in Libya renewed concern that supply disruptions may spread through the Middle East and North Africa.
Each 0.25pc interest rate rise adds €15 to the monthly mortgage repayments on each €100,000 borrowed. If rates rise three times this year it will add €42 to the monthly repayments on every €100,000 borrowed.