With inflation pressures remaining elevated, the rise of 25 base points on interest rates by the European Central Bank (ECB) has consequences for mortgage-holders, experts say.
Recent increases in energy prices have led to a spike in costs across multiple industries, with housing proving no different.
Mortgage site Doddl.ie has said that the impact of further tightening is now significantly more pronounced than in the past few years.
Chief executive Martina Hennessy pointed out that the average mortgage has risen by around €80,000 over the past three years, meaning rate increases today are applied to a much larger debt burden than when the ECB began raising rates in 2022.
She said: “Not all mortgage holders are equally exposed. The 130,000 tracker customers will feel any ECB increase first, followed by variable rate customers, while those coming to the end of low fixed rates could face higher repayments when their current term expires.
“The biggest risk for some borrowers isn't a rate rise itself. It's assuming they have no options. The market currently remains competitive, with rates starting from 3 per cent and products rewarding those with lower loan-to-values.
"This means that homeowners who have seen the value of their home increase could be in a position to unlock more competitive rates.”
Martina explained that a growing behavioural shift is also emerging, with more fixed-rate customers engaging earlier rather than waiting for their term to expire.
Many are now actively reviewing whether switching lenders or restructuring their mortgages could deliver meaningful long-term savings, in some cases worth thousands of euros.
She added: “Your existing lender should absolutely be part of the conversation, but it shouldn't be the only conversation.
"A mortgage broker's job isn't simply to find a lower rate. It's to help borrowers understand all of the options available to them and identify the solution that best fits their circumstances.”
Similar sentiments were shared by Joe Flanagan, business development manager at Irish Mortgage Corporation, who told HomeandStyle that pressure has been primarily put on variable and tracker rates.
“We expect that any bank would be immediately increasing their rates," he said. "The main danger is an immediate rate increase, and trackers have been historically the most vulnerable.”
Joe advised customers that they should carefully review all of their options, making sure they check when their fixed rate - should they have one - is expiring and seek out advice from a mortgage broker.
He remarked, “Those who have been on a fixed rate for the past few years are likely to have a decent rate. The challenge is now coming out and re-entering the market at a higher rate.”
While Joe advised that this could be the time to review options and shop around, Finance Solutions Managing Director Conor McGowan was slightly more hesitant.
Conor explained how the “wholesale market has been pricing in increases leading up to the ECB’s decision”, though the question remains whether lenders will pass on the rates to their customers.
He also compared the banking situation to how airlines have prepared for the fuel crisis.
Conor told HomeandStyle: “For fixed rates, they may absorb the increase ahead of what is expected to be another one in September. I see it a bit like airlines with the fuel crisis; they have been hedging fuel, and banks have been hedging money in expectation of this. They have a lot of funding already from deposits.
“The average mortgage is €350,000, so a 25-basis-point increase would add an extra €47 per month.”
While Conor reiterated that people will start to see higher fixed rates, he is “not so sure” if shopping around is the correct path to follow right now, adding that it is entirely down to each individual’s financial situation.
He added: “Those with tracker rates are most exposed. For those thinking of shopping around, it will be up to the lender and dependent on their income and their outgoings to see if a change is justified.
“For non-bank lenders, there could be an increase from 3.6 per cent to 4 per cent, which would come as a bit of a shock to the customer. This could lead them to shop around.”
The brokers’ advice remains the same: review all options and speak to them before making a final decision.
