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AIB mortgage hike will cost €1,000 per year

HUNDREDS of thousands of homeowners could be hit with €1,000 annual mortgage hikes.

AIB is planning a new increase in variable rates – and other banks are likely to follow.

As many as 300,000 people with variable home loans are likely feel the pain. AIB has around 70,000 customers who have variable rates.

Every 0.25pc rise in rates adds €30 a month to the cost of repayments on every €200,000 borrowed.

Experts said a new rise in rates would push up the number of residential customers who are in arrears.

Broker Michael Dowling, of Abacus Finance in Dublin, said all the lenders were ready to push up variable rates, but each lender was reluctant to be the first to move. Once one goes, others will follow, he said.

He said banks were anxious to see the average variable rate go from around 4.3pc to 5pc.

That could add €1,000 a year to the annual repayments on a €200,000 mortgage.

Mr Dowling said the Government now has a hands-off approach to mortgage rates.

scrambling

He said variable rate rises would push more people into arrears.

Last year AIB pushed through two rises of 0.5pc each.

The hikes revelation came as promises by AIB boss David Duffy that it plans to restructure 33,000 distressed mortgages were dismissed as "spin".

Now it has emerged that the bank plans a new rise in variable rates this year, after a cumulative rise of 1pc last year.

"But it's not going to be a whole series of raises," Mr Duffy told news service Bloomberg.

The bank, which has been given €21.5bn from the State, claims its variable rate is one the lowest in the market.

Meanwhile, there was a huge jump in the number of mortgages issued by banks in the last three months of last year.

This was mainly due to buyers scrambling to avail of mortgage tax relief, which has since been removed.

Some 6,000 mortgages were drawn down between October and December, up from 4,000 in the same period in 2011.

Overall last year, close to 16,000 mortgages were drawn down, with a total value of €2.6bn. This is the first annual increase since 2006.

Almost 14,300 mortgages were issued in 2011, with a total value of €2.46bn.

hnews@herald.ie

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