At least three lending institutions have increased mortgage rates on their fixed-interest products in the clearest signal to date that the interest-rate cycle has turned and rates are on their way back up.
First Active, EBS Building Society and Irish Life Homeloans have raised the rates on fixed-rate products and other institutions are expected to follow suit if rates on the financial markets continue to move upwards. Variable rates are unchanged, and most analysts expect them to remain so until next year when an anticipated increase in official euro interest rates is likely to see them rising.
A First Active spokesman confirmed yesterday it had raised rates on all its fixed-rate mortgage products this week in response to what he said was the rising cost of funds in the financial market over the last six to eight weeks. The company has announced increases in its two-year, three-year and five-year products, with the latter now above 6 per cent.
Irish Life Homeloans also increased its five-year fixed-rate product, to 5.95 per cent from 5.1 per cent, and has suspended its two-, three- and four-year rates.
EBS is now offering five-year fixed rates at 5.95 per cent, up from 5.0 per cent. Its one-year rate is unchanged at 4.5 per cent but the two-, three-, four- and 10-year rates have also risen.
"The move is a reflection of the cost of funds," said Mr Pat Farrell, marketing manager with the society. However, the building society also introduced a new fixed-rate special offer of 3.9 per cent and a special variable rate of 4.5 per cent for new customers.
AIB, Bank of Ireland, TSB and Irish Permanent have not yet changed their fixed rates but are monitoring the situation.
A spokeswoman for Irish Permanent said market rates had moved against the company earlier this week, almost completely wiping out the margins on certain products. But the situation became more favourable as the week wore on and the company was waiting to see how things would pan out, particularly in light of a key meeting on August 24th of the US Federal Reserve.
Many US analysts expect that policy-setting meeting to cause a rise in US interest rates, and this has had a knock-on effect in Europe. However, most analysts do not expect the European Central Bank to raise official euro interest rates before the end of this year.