HUNDREDS of thousands of mortgage holders are to be hit in the pocket after the European Central Bank raised its key lending rate today.
The decision to hike its key refinancing rate by 0.50pc is set to cost those on trackers.
And banks are likely to eventually push up variable rates, although no imminent rise in variable rates is expected for a few weeks.
Today’s announcement will hit the estimated 250,000 mortgage holders on tracker rates
Pressure is mounting on lenders to resist hiking variable rates for the 200,000 homeowners on them as variables in this country are so high.
Mortgage broker Joey Sheahan, head of credit at online broker MyMortgages.ie, said there will now be even bigger rush by those exposed to ECB rate rises to lock in to fixed rates.
“Thousands will scramble to fix their rate now,” he said.
The move to hike rates by 0.50 percentage points will mean a family with a typical tracker is facing an extra €57 a month in repayments, Mr Sheahan said.
This works out at €685 a year in higher repayments.
This is based on a tracker of €250,000, with 25 years remaining, on a 1pc margin over the ECB rate.
Asked about how it would react to the ECB announcement, Bank of Ireland said: “For those customers that hold a tracker mortgage with Bank of Ireland, following any increase in the relevant European Central Bank rate, Bank of Ireland will communicate any changes in their tracker rate with our customers in an appropriate and timely fashion.”
It said it was keeping fixed and variable rate offerings under review.
AIB said it was keeping all its rates under review.
Banks usually increase tracker rates a month after an ECB rate rise.
Permanent TSB said it can absorb the initial rise in ECB rates without passing the cost on to variable-rate borrowers, putting pressure on other lenders.
Variable rates are among the most expensive in this country, with some charging up to 4.5pc.
Meanwhile, founder of personal finance website Askaboutmoney.com Brendan Burgess said Irish banks should be reducing mortgage rates, even as the ECB rate rises.
He said families in this country are already paying 1 percentage points more for new mortgages than the average rate in the Eurozone.
He said that on a mortgage of €300,000, this is €250 more interest per month.
The average rate for a new mortgage in this country is 2.73pc compared with 1.76pc across the Eurozone.
The average new variable rate is 3.66pc, with Bank of Ireland charging existing customers with a loan to value of 90pc 4.5pc, Mr Burgess said.
He said lenders were keeping variable rates high but compete for new business with fixed rates.
When the fixed rate term expires, customers default to the much higher variable rates.
He said customers on variable rates can fix again at lower rates, but many don’t know this or don’t get around to it.