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Mortgage misery as banks set to hike rate

MORE than 350,000 home owners with standard variable mortgages were today facing the pain of higher interest payments.

Permanent TSB is expected to become the first lender of the year to hike its rates with a 0.5pc rise for its 70,000 customers on standard variable rates.

But most other Irish lenders are expected to follow suit in the coming days -- leading to mortgage misery for homeowners.

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

Most of the 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.

They are unable to switch their loan to another lender and their only option is to lock into a fixed rate, analysts said.

The Permanent TSB announcement is expected within days and is likely to be followed by other lenders also pushing up their rates.

The Permanent TSB rate rise will directly affect 70,000 of its customers, but around 350,000 homeowners nationwide pay their mortgages based on standard variable rates.

Lenders are free to increase the rates on these mortgages whether or not the European Central Bank moves its rates.

It is the second time in six months that Permanent TSB has hiked its standard variable rate. It drew heavy criticism last summer 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.

Analysts said the expectation is that the 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 that more lenders are now losing money on mortgages. 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 have a standard variable mortgage you're not safe. You need to do something about it."

Frank Conway of Irish Mortgage Corporation said the rate rise would cause problems for those finding it difficult to pay their bills.

Anyone struggling to meet their mortgage repayments should remain in close dialogue with their lender, he advised.

Experts said 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.

Dan White, Page 14