Tuesday 16 January 2018

Mortgage hike shock

More banks poised to follow as lender increases rates

Charlie Weston

Charlie Weston

TENS of thousands of mortgage holders will be hit with higher interest payments as Permanent TSB becomes the first lender this year to hike its rates.

The Irish Independent has learned the bank will announce it is raising its rates by 0.5pc for existing customers on standard variable mortgages "within days".

Permanent TSB's move will impact directly on 70,000 customers.

But mortgage market experts warned last night that all other lenders were now set to follow by pushing up their rates.

About 350,000 homeowners have standard variable rates. Lenders are free to increase the rates on these mortgages whether or not the European Central Bank moves its rates.

It had been expected that interest rates would rise, but the suddenness of this increase means mortgage misery will hit much sooner than anticipated.

Permanent's standard variable rate is 3.19pc, but the move to hike this by 0.5pc will mean it will cost a borrower with a €250,000 mortgage an extra €66 a month to meet repayments.

It is the second time in six months that Permanent TSB has hiked its standard variable rates. Last summer, it was heavily criticised when it upped its standard variable rate by 0.5pc.

AIB, Bank of Ireland and EBS have all said their rates are under constant review.

The expectation is that other lenders will now impose a higher increase than 0.5pc as Permanent TSB will have moved twice now to take its combined rises to 1pc since the summer.

Mortgage experts said the higher costs of wholesale funding meant most lenders were losing money on mortgages.

Seven out of 10 of Permanent TSB's mortgages are tracker rates, which are heavily loss-making because of the cost of securing funding.

Most of those homeowners affected by the rises in standard variable rates are in negative equity -- where the size of the mortgage is greater than the value of the home. These people are unable to switch their loan to another lender, and their only option is to lock into a fixed rate. A source close to Permanent TSB said the higher rate would only mean extra monthly repayments of €15 as, on average, its standard variable rate customers had just €62,000 outstanding on their mortgages.

Mortgage broker Karl Deeter, of Irish Mortgage Brokers, said people with standard variable rates needed to act fast. "If you a have standard variable mortgage you're not safe. You need to do something about it."

Frank Conway, of Irish Mortgage Corporation, said the move by Permanent TSB, to be followed by other lenders, would cause problems for those finding it difficult to pay their bills.


He advised anyone struggling to meet their mortgage repayments to remain in close dialogue with their lender.

Statistics compiled by a leading lender, which did not want to be named, show there are about 350,000 people with standard variable rate mortgages.

Trackers account for between 140,000 and 200,000 of all mortgages. Trackers were first introduced in 2006, but withdrawn in late 2008.

Between 80,000 and 100,000 people have fixed-rate mortgages, the figures show. This means that standard variable rate mortgages represent around 56pc of the market.

And a hike across the market could push thousands more homeowners into arrears.

Already some 27,000 homeowners have missed repayments for three months or more. Of these, 6,400 have not paid their mortgage for a year.

Irish Independent

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