Bank Of Ireland Rise In Lending Rates Will Add €100 To Mortgage ...

Thousands of homeowners face a €100-a-month hike in mortgage bills after Bank of Ireland announced it was raising its lending rate.

The bank is adding 0.75 percentage points to new fixed-rate loans, while rates for existing mortgage customers wanting to switch to a fixed rate will go up by 0.5 points.

The increase means an extra €105 a month in repayments for a new customer taking out a 30-year €300,000 mortgage.

Thousands of homeowners face a €100-a-month hike in mortgage bills after Bank of Ireland announced it was raising its lending rate. Pic: Getty Images

The increase will affect thousands of homeowners - around a quarter of the market.

One expert warned it was 'inevitable' other banks would follow suit and raise their rates, particularly with another European Central Bank increase expected when it meets a week from tomorrow. And a spokesman for the bank explained: 'Following a cumulative increase of 2.5% in ECB rates since July of last year, Bank of Ireland is increasing interest rates for some of our mortgage and deposit products.

'The increases apply to fixed mortgage rates but variable rates and tracker rates remain unchanged. We're also increasing rates for savers and launching a new one-year term deposit account for personal customers.'

The bank is adding 0.75 percentage points to new fixed-rate loans, while rates for existing mortgage customers wanting to switch to a fixed rate will go up by 0.5 points. Pic: Getty Images

While mortgage rates are rising by 0.75 points, savings rates are increasing by just 0.5 points. The vast majority - some 62% - of the bank's mortgages are fixed rates, while 10% are variable rates and 28% are trackers.

The rise was widely expected in the face of ECB interest rate increases aiming to tackle inflation, which has soared to around 10%, way above the target of 'around 2%'.

Financial commentator Brendan Burgess, of askaboutmoney.com, said: 'Bank of Ireland went from being the most expensive lender to being probably the cheapest lender because they had not put up their rates.'

The increase means an extra €105 a month in repayments for a new customer taking out a 30-year €300,000 mortgage. Pic: Getty Images

The banks have not raised rates by the full increase in ECB base rates so far.

However, Mr Burgess explained: 'Irish banks were the most expensive in the Eurozone and they are no longer because what happened is Avant came into the market and started competing for business so these guys got really caught with that.

'I don't think the other lenders reduced rates when Avant came in, but they didn't put them up when the ECB rate rises came along; Avant did.'

Daragh Cassidy, of price comparison site Bonkers.ie, said: 'Since last July, the ECB has hiked rates from 0% to 2.5%. But until today [yesterday], BoI had only hiked its fixed rates by 0.25 percentage points back in November. So even after today's move, BoI has passed on less than half the ECB rate increase.

The increase will affect thousands of homeowners - around a quarter of the market. Pic: Getty Images

'This compares to rate hikes of one percentage point from AIB and just under one percentage point on average by Permanent TSB over the past few weeks. Like all the main lenders, BoI has kept its variable rates unchanged for now - though these were already very high to begin with.'

He added: 'Unfortunately the ECB is expected to hike rates again by another 0.5 percentage points to 3%. As a result, further rate increases from BoI and its main rivals AIB and PTSB are almost guaranteed over the coming weeks. At the moment the cheapest rate in the entire market is a four-year fixed rate of 2.90% from BoI (albeit with several caveats).

'By the end of the year the cheapest rate on offer is likely to be well over 4%.'

Ireland now has the third cheapest new mortgage rates in the Eurozone, behind France and Malta.