It was forecast but came with a surprise nonetheless. Today the European Central Bank raised interest rates by 0.5 percent, a greater jump than expected. Interest rates have been a close to 0.0% since 2016, after a series of rate drops to help the world economy handle the fallout from the last financial crash. Now the toll of inflation has forced the ECB to raise rates for the first time in a decade, and it will have an immediate knock on effect with Irish homeowners interest rates, particularly those on variable or tracker rates.
Martina Hennessy, Managing Director of Doddl.ie Mortgages, commented on the effect this would take on our rates:
“This increase of 0.5 per cent is not good news for tracker mortgage holders who will have one month before seeing an increase of €23 per month for every €100,000 owed over a 25 year term.
“For a mortgage of €250,000 – which is the average mortgage in Ireland – that’s an extra €696 a year.
What it means for you?
If you are on a rate that is set to increase, it is definitely worth looking into a Fixed Term rate. 2022 has been a massive year for mortgage switchers, with many homeowners locking in long term rates of 5, 10 or even 20 years. This will shield you from further potential rate hikes that are expected in the next few years. Martina says:
“It’s expected that variable rates will also rise in the near future, while those on short-term fixed rates will eventually feel the pinch when they roll out of lower fixed rates into a higher rate environment. For these, I would advise checking if there is a penalty to break out of your current fixed rate if you want to lock in for longer.”
“Rising funding costs for mortgage lenders continue to pose a threat to mortgage rates in general, with upward movement on rates announced by a number of lenders in the last two months and more expected.
“With many aware of imminent rate increases, mortgage switching is at an all-time high as people seek to secure more long term, low cost and flexible fixed rates. Fixing your mortgage is the only way to have security over rising interest rates.”
How to Switch?
Switching has become a lot easier in recent years. Mortgage experts like Doddl.ie are experts at helping homeowners switch their bank or mortgage lender. It involves some paperwork, similar to what you would have has to provide for the original mortgage application. There is also a cost involved for solicitors fees, but many banks will provide joining incentives to cover the cost of that and even some cashback offers that will put money in your pocket today. You could potentially save a lot of money over the long term life of your loan. Check out Martina’s article “Save €20,000 over 7 years”.
You can contact Martina today to see what you can save on your home mortgage at Doddl.ie.