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Tuesday
Jul192011

Mortgage Interest Rates on the Rise

The European Central Bank (ECB) have moved their key interest rate again in July - for the second time this year. 
The rate now stands at 1.5%. The increases will not impact you if you have a fixed rate mortgage. However, if you have a tracker mortgage (which adds a certain guaranteed % onto the ECB rate), you may be getting nervous as the rate has stayed flat at 1% since May 2009. 
For the first time in almost three years you may need to consider how an increase in rates will affect you and decide what action, if any, you need to take.
You can use the Financial Regulators mortgage calculator to work out how your monthly repayment will be affected. 
Tracker mortgages will only increase by the same percentage as the ECB rate, however this is not the case for variable rate mortgage holders, who could continue to face higher increases as the banks seek to turn a profit. If you are not sure what rate you’re currently paying, just call your provider or check your most recent mortgage statement.

Example

If you have a Tracker mortgage of €250,000 over 25 years at 2.5%, the ECB increase of 0.25% will mean an increase of approximately €30 in your monthly repayment.
If you find that you need to cut back to meet your new repayment, you can use our Budget Planner to help you find areas where you can save money. We can help you shop around for things like life assurance, Home insurance and health insurance to make sure you are getting the best price.

To Fix or not to Fix?

One way to avoid the pain of rising interest rates is to lock into a fixed rate mortgage. The problem is that they are not as widely available as before, many lenders simply don't offer them anymore. You also need to consider the long term effect of giving up your Tracker...what if ECB rates come down again in the future? Ask your lender if they can offer you a fixed rate and then work out the difference to see if it might be worth it in the medium to long term. 

What to do if you are having difficulties?

If you are currently struggling with your mortgage or you think an interest rate increase will make it difficult for you to meet your repayments, you should get in touch with your bank straight away. Under the Central Bank’s statutory Code of Conduct on Mortgage Arrears, lenders must have procedures in place for dealing with borrowers that are in danger of going into mortgage arrears, as well as those that are already in arrears.
You can find out more about dealing with mortgage arrears by reading the Central Bank's Consumer Guide to Dealing with your Lender.
Notes & Warnings:

WARNING:
Your home is at risk if you do not keep up repayments on a mortgage or any other loan secured on it. 
  
Variable Rate Loans 
WARNING:
The repayment rates on this housing loan may be adjusted by the lender from time to time.
WARNING:
The cost of your monthly repayment may increase - if you do not keep up your repayments you may lose your home.
Fixed Rate Loans 
WARNING:
You may have to pay charges if you pay off a fixed rate loan early.

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Reader Comments (1)

The rates have very much increase in 2013. Hopefully there's some improvement because thing seem to be getting worse

December 30, 2013 | Unregistered CommenterRing adviser

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