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How Much Will Mortgage Interest Rates Go Up Ireland 2022 And What Does It Mean For Me?

Mortgage interest rates are forecast to go up by 1.8%, increasing the average monthly repayment by €300. Don't worry, here's how you 'fix' it.
mortgage interest rates

The European Central Bank (ECB) base rate drives lender mortgage interest rates, when it goes up so do mortgage rates.

The latest ECB survey of professional forecasters expect the ECB base rate to rise from 0.5% to 1.8% in the next 18 months, the highest rates in over a decade.

So does this mean mortgage interest rates will go up and what does it mean for you?

In a nutshell, yes mortgage rates will go up and the impact on your monthly repayments is likely to be significant.

A 1.8% rise in rates will increase monthly repayments by €184 a month on the average variable mortgage of €200,000 with a 15 year term.

Don’t panic though, by fixing your mortgage interest rates you can still cap these increases and for some even reduce monthly repayments.

Read on to understand what the mortgage rate increases mean for you (including our new simple tool for calculating the impact of rate changes for you) and to get the inside track on what to do about it.

  1. ECB Rate Increases – Mortgage Interest Rates Go Up Ireland 2022
  2. What ECB Increases Mean For You – Mortgage Interest Rates Go Up Ireland 2022
  3. Your Own Interest Rate Increase Calculation – Mortgage Interest Rates Go Up Ireland 2022
  4. Your Interest Rate Increase Calculation – Mortgage Interest Rates Go Up Ireland 2022
  5. What Can You Do To Dodge The Hikes? – Mortgage Interest Rates Go Up Ireland 2022
  6. In A Nutshell – Mortgage Interest Rates Go Up Ireland 2022

ECB Rate Increases – Mortgage Interest Rates Go Up Ireland 2022

The latest ECB Survey of Professional Forecasters came out this Summer.

The survey uses forecasting data from finance experts across Europe to predict the likely direction of interest rates.

The average prediction is that ECB rates will rise from 0.5% to 1.8% in the next 18 months. This sounds pretty realistic with UK interest rates are already over 1% with US rates over 2% and rising.

Some of the European experts surveyed though see rates climbing toward 3% as the ECB struggles to tamp down inflation.

It’s worth remembering that back in the nineties interest rates hit over 10%, no one really knows how high they might get this time around.

What ECB Increases Mean For You – Mortgage Interest Rates Go Up Ireland 2022

Tracker Mortgage Holders

If you are one of the 300,000 tracker mortgage holders in Ireland, these mortgage rate increases will be passed directly onto you. A tracker mortgage ‘tracks’ the ECB base rate and range between 0.5% above the base rate to 2.25%.

If ECB interest rates go to 1.8%, tracker mortgages will increase likewise,

  • 0.5% tracker = 0.5% + 1.8% = 2.3%
  • Average Monthly Increase = €161
  • 2.25% tracker = 2.25% + 1.8% = 4.05%
  • Average Monthly Increase = €174

If ECB rates go to 3% then,

  • 0.5% tracker = 0.5% + 3.0% = 3.5%
  • Average Monthly Increase = €276
  • 2.25% tracker = 2.25% + 3.0% = 5.25%
  • Average Monthly Increase = €298

Variable Mortgage Holders

The 175,000 variable rate mortgage holders got a temporary stay of execution in July when Irish lenders held off passing on ECB rate increases to customers. It is highly unlikely that will happen with future mortgage interest rate hikes.

The average mortgage variable rate in Ireland is 3.6% according to the latest data available from the Central Bank of Ireland [1] , a much higher mortgage interest rate than for the tracker customers.

If the ECB interest rate rises to 1.8%,

  • 3.6% variable mortgage rate = 3.6% + 1.8% = 5.4%
  • Average Monthly Increase = €184

or if the rate goes to 3%

  • 3.6% variable mortgage rate = 3.6% + 3% = 6.6%
  • Average Monthly Increase = €314

Fixed Mortgage Holders

The remaining 235,000 mortgage holders are on fixed mortgage interest rates, this means that lenders can’t pass on the ECB rate increases to these customers. Yet these customers also shouldn’t rest easy either.

The average duration of fixed mortgage rate interest deals in Ireland is less than 3 years. This means that many of these customers will emerge out of their fixed periods onto the highest rates in a decade.

The average fixed mortgage interest rate is currently around 2.5%,

  • 1.8% ECB increase = 2.5% will go to 5.4% variable
  • Average Monthly Increase = €290
  • 3% ECB increase = 2.5% will go to 6.6% variable
  • Average Monthly Increase = €420

Many of these customers believe that they will be able to re-fix at around 2.5% when they come off their current fixed mortgage interest rate deals. This is unlikely, as ECB rates rise the costs of fixed deals for the lenders also rise.

The most likely scenario is that the new fixed interest mortgage rates available in 18 months will rise by a similar amount to the ECB rate increases also.

  • 1.8% ECB increase = 4.3% fixed mortgage rates
  • Average Monthly Increase = €176
  • 3% ECB rate increase = 5.5% fixed mortgage rates
  • Average Monthly Increase = €301

The good news is though that all 710,000 mortgage holders are able to act now to protect themselves from these increases. Read on to use our calculator and get the inside track on how to dodge the impending lender mortgage interest rates hike.

Your Interest Rate Increase Calculation – Mortgage Interest Rates Go Up Ireland 2022

All of the above repayment calculations are based on an average outstanding mortgage of €200,000, but what does the hike in mortgage interest rates mean for your own mortgage?

No worries, that’s why we built our handy interest rate increase calculator so you can see exactly what mortgage rates going up mean for you.

Interest Rate Rise Repayment Calculator
200000
0000001000000
15Years
0Years35Years

Estimated Monthly Repayment Increase

based on predicted ECB rate increases

Your actual increase will vary slightly from the calculator depending on your current mortgage interest rates.

What Can You Do To Dodge The Hikes? – Mortgage Interest Rates Go Up Ireland 2022

Without taking action over 710,000 mortgage holders face an average monthly increase ranging from around €180 to over €300 depending on where ECB rates actually land.

If you take action now by fixing your mortgage rate for 5 years or more, you can avoid the hikes completely.

There are two options open to you.

  1. Fix with your current lender
  2. Switch to a new lender and fix

If you are still in your fixed period, you may think that you will have to pay a ‘break fee’ for breaking out of your existing deal. Actually, due to recent EU legislation that’s unlikely to be the case, so call you bank to double check straight away.

Almost everyone, can fix or switch without penalty.

The best rates are with the ‘non bank lenders’ Avant Money and Finance Ireland, who are over 1% cheaper than Bank of Ireland or Permanent TSB, so if you want to get the lowest repayments possible that’s the way to go.

That means switching your lender for the vast majority of people.

See the comparison of the average mortgage interest rates across the term below.

Average Mortgage Rate (APRC) at LTV <50%3 Yr4 Yr5 Yr7 Yr
Avant Money Mortgage2.44%2.50%2.60%2.81%
ICS Mortgages3.85%3.93%
Finance Ireland Mortgage5.11%5.27%
Haven Mortgages3.20%3.20%3.20%
AIB Mortgage 2.82%2.92%2.84%3.13%
EBS Mortgage3.70%3.60%
Permanent TSB Mortgage3.63%3.49%3.58%3.77%
Bank of Ireland Mortgage3.80%3.7%
APRC = Average Rate paid across the whole mortgage term, table, excludes Mortgage value >€250,000, excludes Green mortgages

In fact the Avant Money 5 year fixed rate above, is €17,387 cheaper over the full mortgage term than Bank of Ireland’s 5 year rate for the average mortgage.

It should take you about 8-10 weeks to complete a switch to Avant.

Bear in mind though that if you are switching lender, you will need to invest about €1,500 to cover your valuer and solicitor costs, unless you switch to Haven who will give you €2,000 to cover these.

In A Nutshell – Mortgage Interest Rates Go Up Ireland 2022

So if you have a mortgage and you don’t act now, you may be looking at a €180-€300 hole in your monthly finances this time next year.

That said, you still have options to dodge these mortgage interest rate hikes completely.

You should look to fix in the next few months.

Call your current lender and confirm there are no break fees, then get in touch with a broker and see if you should switch to a new lender or fix with your current one.

Make sure the broker has all the lenders on board though, so you get the best deal.

Next Steps – Mortgage Interest Rates Go Up Ireland 2022

You can read more about switching your mortgage here, how to break out of your current fixed mortgage here, how to fix your mortgage here, fixing your tracker mortgage here, about how to compare mortgages here or how to calculate your mortgage repayments here.

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