Home Personal Finance Mortgage rates skyrocketed in March – warnings of further hikes

Mortgage rates skyrocketed in March – warnings of further hikes

Mortgage rates skyrocketed in March - warnings of further hikes

The loan rate for people who buy a house is now at its highest level in six years.

The average rate in March was 3.54 percent, according to the Central Bank of Ireland.

This is an increase from 2.92% in February. Rates in Ireland rose much more than in any other eurozone country.

But despite the big jump between the two months, Ireland still has one of the lowest mortgage rates in the eurozone.

Only France and Malta have lower rates.

The eurozone average rose to 3.52 percent, almost three times as much as about 18 months ago, according to figures from the Central Bank of Ireland.

Last week, the European Central Bank raised its key interest rates for the seventh time since last summer.

The ECB’s refinancing rate, which determines the tracker rate, has currently skyrocketed from 0%. to 3.75 pc, with the threat of further increases.

This will drive up the cost of tracker rates and translate into higher flat rates for new borrowers and those coming from a fixed amount.

Variable rates at the major banks have not increased much, but may also be in line with increases.

Daragh Cassidy of price comparison site and brokerage Bonkers said the rise in European interest rates we’ve seen in Ireland in recent months is finally starting to show in central bank data.

“However, despite the large month-on-month increase, our mortgage rates are still among the lowest in the eurozone. At least for now.

“This is because the big banks have been so slow to pass on the ECB rate hikes to mortgage customers,” he said.

Cassidy said the ECB has raised interest rates to 3.75 percent since last July.

But the big banks have only raised their fixed rates by an average of 1.5 percentage points to 2 percentage points. And variable rates have hardly changed.

“However, that ‘generosity’ has largely come at the expense of savers. Savings rates in Ireland are still lousy,” he said.

The best rate from Irish banks is only 1.50 pc with Permanent TSB.

And Bank of Ireland only pays a maximum of 0.75 pc.

In contrast, deposit rates above 3% are now widely available on the mainland.

“Essentially, savers are now heavily subsidizing mortgage holders. Whether that is correct depends strongly on whether you are talking to a mortgage holder or someone with a lot of savings.”

Potential mortgage holders and trackers in particular were warned that the medium-term outlook is for interest rates to rise a lot in the coming months.

Mr Cassidy said: “The ECB is likely to raise its key interest rate, from which trackers and mortgage rates are discounted, to 4% at its next meeting in June, and probably 4.25% by the end of the summer.

“This means that average tracker customers will soon pay a rate of around 5.5%, while the best rate available to potential new buyers will be similar.”

Bonkers.ie is urging people with trackers, floating rate, or who are about to reach the end of their current fixed-rate period, to consult a mortgage broker to assess their options before rates go even higher.

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