Sunday 22 July 2018

More lenders to hike rates despite ECB freeze

Charlie Weston

MORTGAGE lenders are set to press ahead with plans to hike home-loan rates despite the European Central Bank (ECB) again deciding to leave interest rates unchanged.

The lenders are set to follow the lead of Permanent TSB which hiked its standard variable rate by 0.5pc on Monday, the second rise in six months.

Yesterday was the ninth month in a row that the ECB decided not to move rates up from their historically low level of just 1pc.

But economists last night warned the ECB was likely to push up its rates by the end of the year. ECB president Jean-Claude Trichet told reporters after yesterday's meeting that interest rates remained "appropriate". He said economic activity in the eurozone expanded around the turn of the year, helped by a recovery in exports.

But Mr Trichet added the eurozone economy would grow only at a "moderate" pace this year, but the recovery would be uneven and subject to risks.

Economists said that the ECB would move to raise its rates to stem inflation as soon as there is evidence of economic growth in the eurozone. However, financial advisers warned homeowners to brace themselves for mortgage hikes ahead of any ECB move.

Frank Conway, of the Irish Mortgage Corporation, said some mortgage holders were failing to heed warnings that rates will rise.

"We continue to experience historically low borrowing costs and with this there is a danger that some consumers may not be preparing for payment increases," Mr Conway said.

Banks and building societies are free to increase the interest they charge on standard variable rate mortgages for existing customers whenever they want.

Tracker rates can only move when the ECB moves rates.

Some lenders have very low fixed rates but these rates are also set to rise, banking experts said yesterday. Mr Conway advised those on variable rates to lock into fixed rates as a way of providing protection against rising costs. "There are some very competitive three- and five-year fixed rate deals available currently. However, there are also some incredibly expensive offers," he said.

Mr Conway said the best three-year fixed rate for those borrowing more than 80pc of the value of the home was offered by AIB at 3.19pc.

The worst was offered by Bank of Scotland (Ireland) at 7.25pc.

Irish Independent

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