ECB expected to raise interest rates again
The European Central Bank’s Governing Council meets today and is widely expected to agree an increase in interest rates.
Inflation in the euro area escalated over the summer months as the energy crisis continues to intensify.
The European Central Bank increased interest rates in July by 0.5%.
It is now speculated that rates could be increased by as much as 0.75% when the bank’s Governing Council meeting concludes this afternoon.
If rates could up, it will increase repayments for over 400,000 tracker and variable mortgage holders.
The backdrop is inflation, which rose again across the euro area to a record high of 9.1% in August.
Higher energy prices are still the main factor behind the surge in inflation, but food prices and the price of other goods and services are also now going up much faster than the ECB’s target rate of 2%.
The Central Statistics Office will publish detailed figures for inflation in Ireland last month later this morning.
Inflation looks set to continue to rise into the autumn with most utility providers now having announced increases of between 27% and 47% for average electricity and gas bills to take effect from October.
Trevor Grant, Chair of the Association of Irish Mortgage Advisors, has said 285,000 tracker mortgage holders will be directly impacted by an interest rate hike by the ECB.
“There is about 285,000 tracker mortgager customers in Ireland. For every 0.5% of an increase per €100,000 that you owe you can effectively expect to see your mortgage payments increase by €25 a month. And if the rates go up by 0.75% for every €100,000, you can expect to see your repayments go up by €37 per month,” he said on Morning Ireland.
“It is very difficult to know what the average is because of mortgage terms and balances but you are going to see repayments essentially go up, most people by at least €75 per month if the 0.75% announcement is announced. And obviously the larger the mortgage the greater the increase will be,” he added.
He said there was a surprise in July when the 0.5% increase was announced by the ECB as an increase of 0.25% had been expected.
Mr Grant said it is hard to know if those looking to get a mortgage will be impacted by this next increase.
“There are no longer tracker mortgages available. The variable rates were not increased by the banks the last time there was an increase. That was down to the fact they are just too high anyway. And not all fixed rates for new customers were impacted,” he stated.
He said over 80% of new mortgage holders take fixed rate mortgages for many reasons including for security purposes.
Article Source: ECB expected to raise interest rates again – Robert Shortt – RTE