Variable rate mortgages expected to increase shortly

Variable rate mortgages expected to increase shortly

Homeowners on variable mortgages could be set for further pain as interest rates are expected to be hiked in the coming weeks.

According to AIB chief executive David Duffy, they will increase their variable rates shortly in a move that would affect 70,000 customers.

The move is expected to spark a new round of rises from other lenders, hitting around 300,000 people with variable home loans.

Every rate increase of 0.25% adds €30 a month to the cost of repayments on every €200,000 borrowed.

There are fears, however, that any rate increase would also lead to a rise in the number of people in arrears on their mortgage.

It is thought most banks want to get to a point where the average variable rate is in or around 5% – a move which could add up to €1,000 a year to the annual repayments on a €200,000 mortgage for those who are paying around 4.3% at present.

The expected rate rise from AIB comes following two rises of 0.5% each last year.

Those on tracker mortgages would be unaffected by any interest rate hike, however, as their rate depends on the ECB rate.

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