More banks plan mortgage hikes as State 'fails to act'
MORE banks will raise variable mortgage rates following the latest moves by AIB, Bank of Ireland and ICS, experts predict.
And tracker mortgage holders also face disappointment after the European Central Bank (ECB) left interest rates on hold yesterday and gave no indication of any plans of further cuts.
AIB has announced plans for two rises in its variable rate in quick succession, amounting to a combined increase of 1pc.
This will mean customers with a €200,000 variable mortgage are facing an additional €120 in monthly repayments.
Bank of Ireland and ICS are also due to raise variable rates by 0.5pc next month.
Now mortgage experts are predicting these banks are likely to raise mortgage costs again, while other banks will also push up variable rates. The Professional Insurance Brokers Association (PIBA), which represents mortgage brokers, said the fact that the Government had not objected when state bailed-out AIB and Bank of Ireland pushed up rates would clear the way for new rises.
Rachel Doyle of PIBA said lenders were testing the water to see how far they could push up rates.
"If lenders feel the State will not take a stance then they will gradually ratchet up rates to the detriment of borrowers and the economy," she said.
Karl Deeter of Irish Mortgage Brokers said variable rates would eventually hit 5pc.
Bank of Ireland will start charging existing customers 4.35pc later this month, with ICS going to 4.55pc, and AIB due to go to 4pc next month.
Meanwhile, the ECB appeared to be pulling away from a new rate cut yesterday.
The ECB cut rates to a historic low of 0.75pc in July and there was some expectation of another cut to bring eurozone rates into line with those in Britain and the US.
However, the indications are that there may be no further cuts this year.
ECB president Mario Draghi told a press conference in Slovenia yesterday that Europe's central bankers did not discuss the possibility of cutting interest rates. Asked if there had been any discussion about a possible rate cut in the months to come, Mr Draghi said: "(On this question) the answer was no."
Some 400,000 people who have tracker mortgages see their repayments drop by €15 on every €100,000 borrowed for each 0.25pc cut.
But worries about eurozone inflation at 2.7pc meant the chances of a rate cut soon have receded -- a rate cut might have boosted growth, but rates are already low and having little effect.