Sunday 11 December 2016

Mortgage rates to rise 1pc

Permanent TSB move could push thousands into arrears

Charlie Weston Personal Finance Editor

Published 02/02/2011 | 05:00

The rise in standard variable rates from 4.19pc to 5.19pc will add €60 to the monthly repayments for every €100,000 borrowed. Photo: Thinkstock
The rise in standard variable rates from 4.19pc to 5.19pc will add €60 to the monthly repayments for every €100,000 borrowed. Photo: Thinkstock

THE State's largest home-loan lender is preparing to raise its mortgage rate by a full 1pc in a move that is set to shock homeowners.

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Other lenders are now expected to follow Permanent TSB with a similar-sized hike, in a move that could push thousands of homeowners into arrears.

The rise in standard variable rates from 4.19pc to 5.19pc will add €60 to the monthly repayments for every €100,000 borrowed.

Mortgage rates have not been above 5pc for around three years.

Permanent TSB had been expected to raise its variable rate by 0.5pc this month, with other rises later in the year.

But it has opted to impose all of this year's increases in one go. It will bring to 2.5pc the cumulative increases imposed by the lender since July 2009, while the ECB rate has stayed at 1pc.

The move is expected to be followed by other lenders. Some 200,000 mortgage holders have standard variable rates across all lenders.

And by the end of the summer the ECB is expected to hike its main rate to counter inflation in the eurozone.

Impact

An ECB rise would impact 400,000 homeowners who have tracker rates -- but it would also be added onto the variable rate.

Household finances are already reeling from the impact of income tax changes and the introduction of the new universal social charge. A married couple on €55,000 have been left with €1,519 less a year, or €127 a month, from tax hikes.

Home and motor insurance, college fees and petrol prices have all risen this year. Families are also struggling with lower child benefit rates and higher costs for investing in a pension.

Private health insurers VHI, Aviva and Quinn have all pushed through steep increases this year.

A spokesman for Permanent TSB would only say: "We are monitoring the situation and no final decision has been taken yet."

However, Irish Independent sources indicate that an announcement on a 1pc rise is due in the next few days.

The lender has said in the past that just 80,000 of its mortgage borrowers will be impacted by the rise, insisting that most of those with variables have long-standing mortgages. Some 60pc of its mortgage customers have trackers.

Financial adviser Karl Deeter of Irish Mortgage Brokers said other lenders would follow Permanent TSB. He advised affected borrowers to sign up for a two-year fixed deal of 5.19pc.

Recent research conducted for the Irish Independent indicated that three-quarters of mortgage holders would be unable to cope with mortgage rises of €200 or more a month.

Some 45pc of mortgage payers said they would be unable to cope with a €100 hike.

The survey was conducted by market research company iReach -- on a nationally representative sample of 1,000 adults.

Irish Independent

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