AROUND 205,000 MORTGAGE holders with either variable or short-term fixed rates could face rates as high as 6% in the next couple of years.
Why are variable rates likely to rise? Irish banks have come under increasing pressure in recent weeks to increase the rates they offer to savers. International competitors are offering the best savings account returns right now, with German fintech Trade Republic offering overnight rates of 2% and Raisin.ie offering up to 3.6% on one year rates.
Given variable rates have been pretty much untouched so far in the face of a 3.75% ECB rate increase, it is theoretically possible that banks could look to put through ‘catch up’ increases of the full amount taking variable rates to over 7%. What does that mean for mortgage repayments? According to recent mortgage statistics released by the Central Bank of Ireland over 100,000 mortgage holders with less than two years to run on their fixed rates and 100,000 already on variable rates are potentially exposed to mortgage rate hikes hikes as banks look to preserve their margins.
If variable rates do start to rise as predicted, they will impact a whole new set of mortgage holders who have been isolated from repayment increases to date. As with the tracker customer repayments there is a real risk that by the time they wake up to the increases it will be too late to do anything about it.
At 3.95% the €140 a month hike in repayments would be cut to an increase of just €25 a month, as well as giving you absolute certainty on your future repayments. If interest rates fall you do risk missing out on any potential upside, but this needs to be weighed against the risk of falling behind making your mortgage payments if variable rates spiral upward.