ULSTER BANK has become the second bank in 24 hours to increase its interest rates for mortgage holders. Permanent TSB yesterday announced a 1 per cent increase in mortgage rates for standard variable rate customers.
Today Ulster Bank is set to confirm an increase in its mortgage standard variable rate by 0.5 per cent, from 3.85 per cent to 4.35 per cent, from March 1st. The move will add more than €90 to the monthly repayments for a customer with a mortgage of €300,000.
While it is inevitable that all the other mortgage lenders in the State will follow suit in announcing rate increases in the coming weeks, none would be drawn on the timing or scale of such increases yesterday other than to say they kept their rates under “constant review”.
Ulster Bank’s decision comes on the back of the more dramatic interest rate increase from Permanent TSB, the State’s largest home loan lender. In a widely anticipated move, it confirmed yesterday that its new standard variable rate of 5.19 per cent will come into force on March 7th.
The increase, which will affect about 80,000 homeowners, will see a person with an average home loan worse off to the tune of more than €2,000 a year.
It is the bank’s fourth rate increase since August 2009. It is also the bank’s largest rate increase in a single step and means the bank has increased its standard variable rate by 2.5 per cent in less than two years.
For every €100,000 owed, a 1 per cent increase adds €61.60 to monthly repayments. On a €300,000 mortgage, the increase will mean an additional €184.80 per month, or €2,217.60 annually.
Permanent TSB also said yesterday it had suspended its fixed-rate products for new customers ahead of a repricing, which is likely to happen in the next two weeks. However, it denied media reports that it was planning to exit the fixed-rate market.
People who are on fixed rates with the bank at present will be unaffected by the rate increases or the fixed-rate suspension, but those on variable rate mortgages will not have the option of switching to a fixed rate in the coming days to avoid the punitive effects of the rates hike.
Bank sources said it had taken the decision to suspend its fixed-rate offerings because it could not sustain them at their current prices. The bank stopped offering many of its more popular fixed-rate products as far back as late 2008.
Permanent TSB said it did not intend to make any further increase to its standard variable rates this year outside of any increase in ECB rates. It is widely anticipated that the ECB will begin a round of rate hikes by September at the latest.
