Sunday 21 January 2018

Homeowners with trackers to escape rate hikes until 2012

Charlie Weston Personal Finance Editor

HOMEOWNERS on tracker mortgages will not be hit with any new interest-rate hikes for the foreseeable future.

The European Central Bank (ECB) yesterday kept interest rates at a record low, with no indication that rates were to rise any time soon.

ECB President Jean-Claude Trichet said rates would remain at a record low of 1pc for the 19th month in a row.

The decision will come as a huge relief for more than 400,000 homeowners who have tracker mortgages, which can only rise when the ECB increases its interest rate.

However, there is no guarantee homeowners on standard variable rates will be spared from fresh hikes, with one leading mortgage expert predicting rises of up 1pc by the end of the year.

Economists said they now expect the ECB to hold off from raising rates, possibly until 2012. Most economists do not expect any change until the end of 2011. There had been fears that eurozone rates were due to rise earlier than that in a bid to stem inflation in the currency zone.

However, ECB bosses have now lowered their forecasts for inflation for next year and for 2012. A threat of inflation in the 16-country eurozone would be the main reason interest rates would rise.


KBC economist Austin Hughes said he was not expecting a rate rise until the end of 2011, or early in 2012.

Karl Deeter of Irish Mortgage Brokers, who correctly predicted this year's variable rate rises, now predicts standard variable-rate mortgages will rise by 1pc in 2011.

Most lenders pushed up variable rates twice this year, with Permanent TSB imposing three rises in a 12-month period. Banks can increase standard variable rates at any time, unlike trackers which can only rise if the ECB rate rises.

The average standard variable rate in the mortgage market here is now between 3.5pc and 4pc, but this will hit 5pc next year, Mr Deeter said.

Some 200,000 homeowners have standard variable rate mortgages.

Banks and building societies will be forced to charge more for variable rates because of the €85bn bailout for the State.

Some €35bn of this money is going into the domestic banks, but the interest rate on this money is higher than emergency money provided to the banks by the ECB up to now.

Meanwhile, this means costs will rise for banks, forcing them to pass on their higher costs to variable-rate mortgage holders.

Mr Trichet yesterday welcomed the deal reached between Ireland, the European Union and International Monetary Fund.

Irish Independent

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