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Almost 150,000 ‘Mortgage Sleepwalkers’ Face Rates of 6%+

148,000 mortgage holders with either variable or short term fixed mortgage rates could face rates as high as 6% next year.

Sleepwalkers

While tracker customers have borne the brunt of recent ECB rate increases, variable and fixed rate customers have seen little or no increases to their mortgage repayments to date. 

Now though these customers risk sleepwalking into rates as high as 6% as banks look to pass on increased funding costs.

According to recent mortgage statistics released by the Central Bank of Ireland over 50,000 mortgage holders with less than a year to run on their fixed rates and 100,000 already on variable rates are now exposed to mortgage rate hikes.

A fixed rate customer paying the average fixed rate of 2.85% will see their mortgage repayment rise by €224 a month if they roll off onto a rate of 6%. While the average variable rate customer on 4.02% will also see their repayments climb by just over €140 a month.

Why are Variable Rates Likely to Rise?

Irish banks have come under increasing pressure to increase the deposit rates they offer to savers. 

International competitors are offering the best savings account returns right now, with Dutch fintech Bunq offering 1.56% interest for on demand savers for example.  In an attempt to head this off we have already seen Irish bank overnight deposit rates creeping up.

This good news for savers is likely to mean bad news for borrowers as the banks look to preserve their profits on the difference they charge between both. We have already seen variable mortgage rates rise by 0.54% so far this year and further increases now look inevitable.

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. 

How Much are Variable Rates Likely to Rise By?      

So how much are mortgage interest rates going to go up by? The average variable mortgage rate in Ireland has already risen from 3.48% to 4.02% so far.

Current mortgage rate in Ireland 2023
Housing Tracker (PDH) Variable Rate Fixed 1 Yrs+
Private Household +1.15% 4.02% 2.85%
Buy To Let +1.08% 4.39% 3.82%
Central Bank retail Interest Rate data updated 20/10/2023

With the ECB rate likely to stay above 4% for the foreseeable and rising deposit rates, banks may now look to put through ‘catch up’ increases to offset their increased funding costs . This has already happened to over 30,000 variable mortgage rate holders with vulture funds where variable rates are now as high as 9% in some cases. 

If variable rate increases track those seen across Europe where the Eurozone average mortgage rate has moved from 1.31% to 3.89% in the last 18 months, we would expect to see an increase of 2.58%, which would take Irish variable rates to an average of 6.06%. 

What Can I Do To Avoid the Hikes?

If you’re on a variable rate or a fixed rate with less than a year to run you may still be able to avoid these hikes by switching your mortgage and fixing your rates long term on the best mortgage rate

As rates have been rising it’s unlikely that you will incur a breakage fee if you choose to break your current fixed mortgage deal to avoid higher rates. This is because EU rules limit when banks can charge breakage fees. 

It may even be worth breaking your current short term fixed rate now and paying more to secure a long term fixed rate as the current low long term fixed rates deals available now are unlikely to be around this time next year.

Fixed rates of up to 30 years are available at 3.95% from some lenders, such as Avant Money. At 3.95% the €223 a month the average hike in repayments would be cut to just €75 a month, as well as giving you absolute certainty on your future repayments. 

Standard Mortgage Average Rate (10-15yr) at LTV < 50%
APRC at LTV < 50% Avant Money Haven Mortgages AIB Mortgage EBS Mortgage Permanent TSB Bank of Ireland ICS Mortgages Finance Ireland Bank of Ireland (Re-fixing)
10 Yr 4.00% 4.70% 4.76% 5.20% 4.70%
15 Yr 3.95%
20 Yr 3.95%
25 Yr 3.95%
30 Yr 3.95%
Correct as of 01/11/23. APRC is the Average Rate paid across the whole mortgage term.

You can work out your own savings by switching by using our mortgage repayment calculator.

Be aware though if interest rates fall you do risk missing out on any potential upside though.

The high street lenders have some of the highest fixed rates on the market for existing customers, so don’t sleepwalk into higher rates, talk to a mortgage broker and get market based advice before choosing your lender.

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