Thousands of mortgage holders face payment shock as their fixed-rate contracts expire

Some 50,000 mortgage holders in Ireland are facing a major “payment shock” as they fall out of historically low fixed-term contracts and into a new era of higher interest rates, in some cases having to pay up to €6,000 more a year.

Over the next three years, €12 billion in mortgages in the State will come off fixed-rate contracts into a much higher interest rate environment, according to mortgage broker Doddl.

“If we take the average mortgage drawn down over the last five years of €253,950, this would mean that there are approximately 50,000 more holders who will be rolling out of fixed rates which averaged 2.5 per cent on to much higher rates,” Doddl managing director Martina Hennessy said.

[ Mortgage rates rise sharply in January as squeeze on mortgage holders tightens ]

For those on a typical €250,000 mortgage, monthly repayments could go up by almost €500 or by €5,870 a year, she said.

Trinity Business School dean: ‘AI brings a huge threat to people’s ability to learn and to upskill’

---

We must do more to welcome Irish people returning home

---

Buyers of older homes may pay thousands more per year in mortgage repayments

---

Family affairs: How Ireland’s newly rich are putting money to work in secretive firms

---

Ms Hennessy said the Republic was significantly more exposed than other countries to higher rates because the fixed terms offered here were relatively short.

“Due to pricing and availability of longer term fixed rates we are a nation of short-term fixed rate mortgage holders and are therefore exposed to interest rate increases,” she said.

Why are Irish companies shifting their stock listings to the United States?

Listen | 38:41

“This is at odds to our European counterparts who tend to fix for whole of mortgage. In Ireland the only lender currently offering fixed rates of over 10 years is Spanish lender Avant Money which offers fixed terms of up to 30 years under its One Mortgage product,” she added.

The European Central Bank is expected to opt for another half-point bump in rates next week, bringing its main refinancing rate, the one that affects mortgages, to 3.5 per cent, up from zero per cent last July. Markets are expecting this to rise to close to 4 per cent by the summer.

While lenders here were initially slow to pass on the higher rates, this is changing. Permanent TSB this week became the latest provider to announce an increase in rates, lifting fixed-term mortgage rates for new business by three-quarters of a percentage point.

The decision will, for example, increase the rate on PTSB’s three-year fixed mortgages on a property where the loan-to-value ratio is 60-80 per cent to 4.35 per cent.

In its latest Financial Stability Review, the Central Bank said the prevalence of fixed-rate mortgages had increased in recent years “which has helped to reduce some households’ exposures to rising interest rates in the short term”.

However, it noted that of those households who had availed of fixed-rate mortgages, only 39 per cent were fixed for greater than three years.

“As these fixed rates mature, many households will be faced with higher interest rates and potentially stretched mortgage repayments, although a range of developments in recent years are supportive of resilience to this shock,” it said.