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Blow for homeowners as BoI to hike mortgage rate

BANK of Ireland will today reveal that it is increasing mortgage rates for thousands of hard-pressed homeowners.

The move comes despite the European Central Bank (ECB) leaving its rates unchanged yesterday -- for the 11th month in a row.

Homeowners who are vulnerable to rising mortgage rates are now being warned that they have seven days to act.

Experts are advising new buyers -- as well as those who are coming off a fixed rate or are on a standard-variable rate -- that they should lock in now.

Bank of Ireland (BoI) and its subsidiary, ICS -- which between them have one in four mortgages in the country -- are to announce that they are increasing their standard-variable rates for existing customers by 0.5pc. They are also raising fixed rates by up to 0.7pc for existing customers who want to fix, the Irish Independent has learned.

The change in the standard-variable rates will add €80 a month to the repayments of someone on a €300,000 mortgage as the standard-variable rate goes from 2.6pc to 3.1pc.

Over the course of a year, the higher cost will amount to almost €1,000. The new rates will take effect from next Friday, April 16.

Existing customers of ICS Building Society who want to fix for five years will now have to pay close to 5pc from the middle of April -- up from 4.25pc.

Fixing for five years will become €100 a month dearer, based on a €250,000 mortgage over 30 years.

EBS Building Society is set to follow Bank of Ireland's hike with rises within days in its standard-variable and fixed rates for both new and existing customers.

The move by BoI/ICS comes just a week-and-a-half after AIB increased its standard and fixed rates by 0.5pc. This newspaper revealed that AIB plans two further rises before the end of the year.

Permanent TSB has hiked its standard-variable rates twice since last summer, pushing them up by 1pc.

The moves by domestic banks to raise their mortgage rates for both new and existing customers -- other than those that are on trackers -- means that their rates are now coming up to the levels already charged by foreign-owned banks in the Irish market.

When the ECB began cutting rates at the end of 2008, most of the foreign banks failed to pass on all the cuts on standard-variable rate mortgages.

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The ECB left its key interest rate unchanged at a record low of 1pc yesterday -- the same level it has been at since last May.

Economists said there was little prospect of any rise in the ECB rate before early next year. Those on tracker mortgages will therefore escape rises, as these are linked to the ECB rate.

The BoI variable loan-to-value rate is also going up by 0.5pc. New customers of BoI will see fixed rates rise by between 0.4pc and 0.5pc.

ICS rates are to rise by more. The variable loan-to-value rate will rise by 0.6pc from April 16.

For existing ICS customers, two-year and three-year fixed rates will rise by 0.55pc, but the five-year rate will go up by 0.7pc.


Both BoI and AIB have pushed up mortgage rates for existing and new customers, despite receiving €3.5bn each from the State. AIB needs an additional €7.4bn in capital and BoI needs a further €2.7bn.

It is understood that BoI will argue today that it is paying more to customers for deposits than it is receiving for mortgages, making its current mortgage pricing unsustainable.

The bank is adamant that it is supporting first-time buyers. It has lent €2bn in mortgages in the past year, with a third of this going to new buyers.

It is understood that of the 200,000 mortgages the BoI group has, some 60,000 are on standard variable rates.

Karl Deeter of Irish Mortgage Brokers said the move would push up the monthly cost for someone who has borrowed €250,000 over 25 years by €760 per year after tax.

"This comes in a year of cuts, levies, higher tax costs and deflation," he said. "It seems their greed knows no bounds."

The chief executive of the Professional Insurance Brokers Association, Diarmuid Kelly, warned that the better-value, long-term, fixed-rate mortgages were beginning to disappear.

He said: "There is a very short window of opportunity now for those seeking security around the level of their future mortgage repayments to act fast before the rates increase further."

And he warned that the risk associated with fixing for just two to three years was that people could leave themselves exposed to a large jump in repayments within a relatively short period of years.

Mr Kelly added: "Five years or longer at a value low rate is the optimum."

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