Editorial: Triple hike another blow to embattled mortgage holders

Borrowers are facing three more interest rate hikes; Photo: PA© Niall Carson

Taoiseach Leo Varadkar tells us there are 400 first-time buyers purchasing homes every week – a level not seen since the Celtic Tiger. He says the Government is “pulling all levers” available to get housing supply going and nothing is being ruled out. “We have a long way to go, but I am more confident now than ever before we are on the right path,” he said yesterday.

Tánaiste Micheál Martin says the highest number of commencement notices on record were filed last month, signalling the start of construction on 3,300 houses in March. He says more social houses were built in 2022 than in any year in almost half a century, and the number of homes completed last year was up 45pc.

The Government has approved another batch of new measures to speed up house building. Money is not an object so another billion is being thrown at the wall in the hope it will stick like plaster.

A 12-month exemption on development levies is to take effect from today, along with an exemption from a water connection fee. A cost rental scheme is being put in place to bridge the viability gap on the building of apartments. And the grants for doing up vacant and derelict buildings to bring them into the housing stock is being increased. The latter suggests the scheme was ill-conceived in the first place. Tinkering with a scheme so soon seems an acknowledgement of error.

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Yet it all still feels like scratching the surface on housing supply. Even since the latest iteration of the Government’s plan, Housing for All, was published 18 months ago, the demands have changed with the arrival of 80,000 Ukrainian refugees.

Housing Minister Darragh O’Brien says the targets for the number of new houses will be revised up in line with population increases. Yet the minister distinctly didn’t answer a question on whether he knows how many houses are actually needed.

The 400 first-time buyers coming into the homeowning market every week enter at a time of instability around mortgage repayments. If you thought the worst was over with interest rate hikes, then think again. Borrowers are facing three more interest rate hikes as the European Central Bank is expected to keep the pressure on to control inflation. The ECB rates are now expected to hit 4.5pc by July. The decade-long era of low and negative interest rates only ended last summer to put a brake on rising prices. The hits just keep on coming. Three more ECB rate rises will add €2,500 a year in extra repayments on to the average tracker mortgage since rates first started to rise last summer. Trackers are set at a margin over the ECB and rise and fall with the movement of the key refinancing rate.

Rising fixed rates though also make it more difficult for first-time buyers to afford to buy a home as it pushes the mortgage repayments beyond their scope. The slow delivery of supply, albeit slightly speeding up, while demand continues to rise, means there’s little to suggest a dramatic calming of house prices anytime soon.

Any initiative to increase housing is welcome, but getting a house is not the end of a buyer’s woes.