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Friday 15 December 2017

# How rising interest rates will push up the amount you actually end up paying

Example (based on the Permanent TSB/ESRI House Price Index -- Q3 2010):

Based on the average price for a house nationally -- €198,689.

A property at €198,689 now would cost the following:

A mortgage of 90pc LTV (loan to value) = €178,820 over 30 years @ 4.39pc (AIB current five-year fixed rate):

Monthly repayments will cost €894.40.

Cost of credit over the five- year term of the loan will be €20,688.60.

Scenario with 5pc drop in the purchase price of this property and a 1pc increase in interest rate:

If, say in six months, the property fell by 5pc to €188,755, but the fixed rate increased 1pc to 5.39pc.

A mortgage of 90pc LTV = €169,879 over 30 years.

Monthly repayments would now cost €952.86.

Cost of credit over the five- year term of the loan would be €24,279.20.

Scenario with 10pc drop in this property and 1pc increase in interest rate:

If, say in six months, the property fell by 10pc to €178,820, but the fixed rate increased 1pc to 5.39pc (90pc LTV €160,938 over a 30-year term).

Monthly repayments would now cost €902.71.

Cost of credit over the five-year term of the loan would be €23,018.40.

Irish Independent