Interest rate hike expected in July will hit mortgages and loans

Interest rates could be raised by the European Central Bank (ECB) in the coming months, leading to increased mortgage repayments for thousands of homeowners and borrowers.

European Central Bank President Christine Lagarde indicated this week that the financial institution could raise interest rates from historic lows as early as July as inflation in the euro zone soars.

The ECB should end bond purchases “at the start of the third quarter”, Lagarde said in a speech in Ljubljana, and could then raise interest rates “just a few weeks” later.

This is seen as the clearest sign from Lagarde that the ECB is ready to change rates soon.

The US Federal Reserve and other major central banks that have already taken steps to fight inflation.

ECB policymakers will then meet on June 9 and July 21 to decide on their course of action.

There has been no increase in interest rates for over a decade and this move would lift rates from their current historic lows.’s Daragh Cassidy said any rate increases were likely to be small and gradual.

“Anyone on a fixed rate won’t see an immediate change in their repayments – but when they come to the end of their fixed rate period, they will face higher rollover rates,” he said. declared.

However, he said those with follow-on mortgages or variable rates could see an almost instant increase in their monthly repayments.

“For someone who has €200,000 left on their 20-year tracker mortgage – who is currently paying a 1% margin – they are looking at an increase in repayments of around €45 per month if the ECB raises rates by 0 .50%.

“If you are an average first-time buyer borrowing €250,000 over 30 years at an average rate of 2.76%, an increase of 0.50% would add around €70 per month to your repayments (if you are on a variable rate) .

“So these are not huge sums of money. However, if rates were to eventually return to more normal levels – say around 3% – that €250,000 mortgage would cost over €400 more every month!” said Mr. Cassidy.

He added that rising interest rates would increase borrowing costs for car loans, home repairs or home renovations.

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