Responding to the recent ECB interest rate increase of 0.5 percent, Brokers Ireland said this, the sixth increase since July last, brings the rate to 3.50 percent, and would add a total of €640 a month to a €330,000 mortgage on a 1.25 tracker rate.
Rachel McGovern, Director of Financial Services at the organisation which represents 1,225 broker firms said the situation is very worrying for the vast majority of mortgage holders, not just tracker mortgage holders.
“There are about 315,000 borrowers, including tracker mortgage holders, on variable rates. The remaining 400,000 plus mortgage borrowers are on fixed rates, but over six in ten are fixed for less than three years.
“Many of them will be exiting these fixed rates in the near future and will be coming out into a rising mortgage environment with no certainty around where rates are going to end up,” Ms McGovern stated.
She said it was disappointing to see Irish inflation having increased by 0.7 percent to 8.5 percent.
“That is the last thing we need right now. Food inflation has been adding to the inflation accelerators such as energy that we’ve gotten accustomed to over the last twelve months.
“It’s time for the state bodies with responsibility for consumer protection to get out the stick and address unreasonable profiteering.
“I would include in this the need for lenders to increase interest rates on deposits, now that they have increased mortgage interest rates, substantially in some cases,” she said.
And she advised aspiring and existing borrowers to take professional advice from a broker who has expertise in mortgages and knows the best options to suit individual circumstances
“That is particularly relevant given the complexity of the market at the moment,” she concluded.
Borrowers in arrears urged to seek help
Meanwhile, commenting on mortgage arrears and repossessions for Q4 2022 published by the Central Bank of Ireland, Brokers Ireland said the fact that the numbers in new arrears, that is up to 90 days, have jumped almost five times that of the previous quarter (2,307 up from 494 ) clearly indicates the distress being caused to families as a result of rapidly rising interest rates.
“This is very worrying and clearly more borrowers will have been adversely impacted in the intervening three months. It’s a very difficult time for borrowers with other costs, including food and energy, having risen substantially also, and as we’re seeing today lenders further increasing their interest rates.
“We would encourage all borrowers falling into arrears to make contact with their lenders at an early stage to seek a solution. Ideally they should look for professional help from a mortgage broker who has the expertise in dealing with lenders,” Ms McGovern commented.
Ms McGovern said the figures also show much evidence of the legacy of the last financial crash with over 19,000 borrowers in arrears for over two years with many of these in arrears for more than ten.
“Their situation is being exacerbated by increasing interest rates. In that regard there appears to be no let up with indications in recent days from the European Central Bank that interest rates may continue to rise.
“One would have to question the rationale for such rapid rises, up 3.5 percent since July last,” she concluded.
