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Mortgage lender hikes variable and fixed rates by up to 2 percentage points


Billy Kane, CEO of Finance Ireland. Photo: Fennell Photography

Billy Kane, CEO of Finance Ireland. Photo: Fennell Photography

Billy Kane, CEO of Finance Ireland. Photo: Fennell Photography

FINANCE Ireland is the latest lender to increase its mortgage rates in reaction to two increases from the European Central Bank.

The non-bank lender’s variable and new fixed rates are going up from Friday.

It will raise variable and fixed rates for its mortgage products by between 1.5 percentage points and 2 percentage points.

These are large increases, mortgage experts said. It means some rates are set to be €300 a month more expensive.

The extent of the rises depend on loan to value and/or term of the fixed rate.

The new rates will come into effect immediately for new business.

Mortgages applications which have been approved and which are drawn down before close of business on Friday of this week will continue to avail of existing rates.

This means the lender has given switchers and new buyers in the process of getting a new mortgage little advance notice of the rate rises.

After the rate increase, a 20-year fixed rate mortgage will be priced from 4.6pc to 5pc, depending on loan-to-value percentage band.

A first-time buyer, yet to draw down, with a 90pc loan to value, will see the five-year fixed rate go from 3.95pc to 5.95pc from Friday, according to mortgage broker Michael Dowling.

This will add around €300 to monthly payment.

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Over a year this works out at an additional €3,600 in repayments.

Some rates for buy-to-let lenders will go to 6.8pc, rates that have not been seen in this market for a long time.

Mr Dowling said: “These are savage increases, and it appears that they are out of line with where rates are at the moment.”

It is the second time this year Finance Ireland has increased rates.

A spokesperson for Finance Ireland commented: “Over 80pc of our loan applications in the past year have been for fixed terms of 10 years or more as customers look to lock in certainty in a period of widely forecasted interest rate increases.

“Overall, we have funded strong mortgage volumes through this year, however these interest rate increases we are implementing are a direct result of significant increases in funding costs over recent months.”

The move comes after the European Central Bank twice hike rates this summer, taking its key lending rate to 1.25pc.

And it has threatened more rate rises.

Last week it emerged that ICS Mortgages is to increase all its new fixed rates by 0.5pc across all loan-to-value bands from the start of this month.

Its five-year fixed rate for those with a 90pc loan-to-value ratio will be 4.19pc.

This comes after a previous announcement that Dilosk-owned ICS is raising its variable rates by 1.25 percentage points from October 1 for residential customers.

In August, ICS Mortgages said it was capping the size of new home loans at just two-and-a-half times income for the first time.

Pepper, which manages 60,000 mortgages sold to vultures by the banks, has hiked variable rates by 1.25pc.

This has pushed up payments by €140 a month for one borrower spoken to by the Irish Independent.

Homeowners whose mortgages are managed by Pepper and other loans servicers can’t fix their rates, while many can’t switch to other lenders for a variety of reasons.

The trapped homeowners are now fearing what is expected to be a spate of European interest-rate rises.

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