TENS OF thousands of Irish homeowners are facing fresh financial pain after the European Central Bank announced its second interest rate rise in three months.
The bank raised its main lending rate by a quarter of a percentage point to 1.5 per cent yesterday in a move that will add over €40 to the monthly repayments of a person with a €300,000 tracker mortgage.
Since all tracker rates are contractually tied to the ECB rate, they will automatically rise in coming days, although the timing of announcements by the State’s lenders will vary.
For every €100,000 owed on a 30-year tracker of 1.5 per cent plus the ECB rate, an increase of a quarter of a point adds €13.12 to monthly repayments. A person with a €300,000 tracker mortgage will see their repayments rise by €480 annually.
Overall, a person on a €300,000 tracker will be worse off by nearly €1,000 a year following the two ECB interest rate increases since April.
Yesterday’s increases are also certain to have a knock-on effect on standard variable-rate mortgages, which are already in a dramatic upward spiral as banks have sought to repair their fractured mortgage books.
The increase came as a source close to the European Central Bank, European Union and International Monetary Fund bailout “troika” said the Government may be asked to frontload reform policies under its rescue plan to counter an upsurge in market pressure due to the turmoil in Greece.
Asked about the impact of the rate increase in Ireland, ECB president Jean-Claude Trichet said the measure was designed to foster stable prices. “Ireland, as all other countries, is benefiting from the fact that we are credible in delivering price stability, and we have a solid anchoring of inflation expectations,” he said.
He noted, however, that the bailout plan was “going in the right direction”, and said it was important to apply the programme.
“I only mention the fact, for instance, for Ireland, the current was positive last year, the last figure we have, and that is something which demonstrates that the adjustment is proceeding in line with what was foreseen.”