ECB rate rise leaves tracker holders facing €2400 increase in yearly ...

The European Central Bank (ECB) is set to impose another rate rise next week – in a move that will hit tracker mortgage holders and make borrowing for first-time buyers more expensive.

he fifth ECB rate rise will mean a typical tracker mortgage, with €150,000 left to pay, will have been hit by a combined €2,400 per year in higher repayments since last summer.

It is also expected to lead to another rise in fixed rates. Bank of Ireland has already imposed a second increase in its fixed rates.

The latest ECB rate rise – coming into effect tomorrow week – is expected to be 0.5 percentage points.

It means the monthly repayments on a typical tracker will have gone up by €200 since last summer.

That’s based on a tracker on a margin of one percentage point over the ECB rate, with €150,000 left to repay over the next 15 years.

Since last July, the ECB key refinancing rate, from which trackers are priced, will have gone from 0pc to 3pc – if another 0.5 percentage point increase is imposed.

Vulture funds that own around 100,000 mortgages have been passing on each ECB rate rise to customers.

Most of these homeowners are trapped on variable rates, as the vulture funds will not offer them fixed rates.

They are also unable to switch providers as many of them have missed payments in the past.

Some are already paying rates as high as 7pc. There have been warnings that repeated increases in vulture-fund owned mortgages will push large numbers of these people into arrears.

Mortgage broker Michael Dowling, of Dowling Financial in Dublin, said the typical tracker rate was one percentage point above the ECB base rate.​

​Mr Dowling said all tracker-rate customers must seek advice before they make any decision to forgo their tracker rate. Bank of Ireland’s fixed rates for new customers are to go up by 0.75pc immediately.

This rise will add €125 to monthly repayments for a first-time homeowner borrowing a €300,000 mortgage.

For existing customers of the bank coming to the end of a fixed rate, the rise is 0.5 percentage points.

This includes customers who are coming to the end of their fixed rate period and are seeking to refix their mortgage, and tracker rate or variable rate customers who wish to move to a fixed rate.

Variable rates are unchanged, and tracker rates move in line with the ECB rate.

The bank last increased its fixed rates in November, when they went up by 0.25 percentage points.

Applicants who already have a credit approval, and who draw down the mortgage by February 21, are still in a position to avail of the previous fixed rates.

In a move that will be welcomed by savers, Bank of Ireland is also increasing its deposit rates.

The rate on its Regular Saver personal deposit account will go up by 0.5 percentage points, allowing customers to earn 0.75pc on Mortgage Saver, Goal Saver and Child Save accounts, capped at up to €15,000.

The bank is launching a new one-year term deposit account for personal customers at 0.50pc, which is capped at €100,000.

The fixed rates on new mortgages are effective immediately, while deposit rate changes will take effect this Friday.

It comes after big shareholders in Bank of Ireland began questioning the bank’s “uneconomic” mortgage pricing after all its main rivals put up rates in the last two months.

AIB, Permanent TSB and Avant have all recently increased the interest they charge on fixed-rate loans in response to a series of aggressive rate rises from the ECB.