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Thousands of homeowners hit by new mortgage rate hike

THOUSANDS of homeowners are to be hit after Ulster Bank signalled it will increase the interest on its standard variable rate mortgages.

The move will increase repayments for a family with a €300,000 mortgage by €93 a month.

It is the second time this year the British-owned bank has increased its variable rate for existing customers.

The lender is responsible for around one in seven mortgages in the market, meaning it has around 120,000 mortgage customers.

The rate is to rise by 0.6pc to 4.95pc with effect from July 1.

This will make it the second highest variable rate in the market after Permanent TSB, which hiked its rate by 1pc at the start of the year to take it to 5.19pc.

The Ulster Bank move will mean repayments on every €100,000 borrowed over 20 years will rise from €625 to €657, a monthly rise of €32.

In March, Ulster Bank increased its variable rate by 0.5pc. This means the combined rises this year have been a hefty 1.1pc. The lender blamed higher funding costs for banks.

The two variable rate rises are four-times greater than last month's increase in the European Central Bank rate, when the ECB pushed up its key rate from 1pc to 1.25pc.

Karl Deeter, director of operations at Irish Mortgage Brokers, said the move by Ulster Bank meant it now had one of the highest variable rates in the market.

"This increase means there is no safe haven for borrowers if you do not have an existing fixed rate or a tracker," he said.

The latest blow to homeowners comes after Bank of Ireland and its subsidiary ICS raised interest rates on their fixed mortgages to as high as 6pc earlier this month.

Variable rates at Permanent TSB, Ulster Bank and EBS Building Society have all risen this year. Fixed rates have been hiked by Ulster Bank and AIB.

Permanent TSB is not allowing the majority of its customers to fix, but a small number who are coming to the end of an existing fixed rate or an introductory discount deal will be given the option to fix at rates of up to 9pc.

Brokers said this meant that Permanent TSB had effectively closed off the option of fixing for its customers. EBS has also closed off the option of fixing.


Meanwhile, a report from investment bank Citi predicts another five rate hikes from the European Central Bank by the end of next year, in a move that would hurt 400,000 people who have tracker mortgages.

In April, the ECB increased its rate to 1.25pc, with expectations that it will announce another rise when its governing council meets again on June 9.

If the ECB increases its rate from 1.25pc to 2.5pc by the end of next year, it will mean monthly repayments rising by €225 on a €300,000 mortgage.

Irish Independent