Homeowner’s mortgage jumps from €765 to €1,089 after ECB rate rise

While many people will struggle to pay the higher mortgage rates coming as a result of the decision of the European Central Bank, its monetary policy will hit some harder than others.

Nicola bought her home in the west of Ireland more than 20 years ago. But due to a series of personal setbacks she ended up in substantial arrears with her home loan taken on by Pepper Finance just over four years ago.

She had to go through the insolvency process and thought she had come through her financial worries when a deal was sealed that would mean her paying €765 each month off her mortgage of €190,000 for the foreseeable future.

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Then, just months after the deal was done, rates started to climb — following the hawkish stance adopted by the ECB —and with them her repayments. They reached €1,089 last month, €324 more than she had bargained for.

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“It is all so stressful and the only way I can afford it is by taking on longer hours at work and I am already working night shifts on top of day shifts and I know that when interest rates go up again I’m just going to have to keep doing more extra hours. To go from €765 to €1,089 with no end in site is just so unfair and because I am with Pepper I am trapped and don’t have the choice of going to another provider.”

This week Pepper Finance and Start Mortgages said their variable rates were rising by between 0.75 and 1 per cent which will mean Nicola’s monthly repayments climb further.

Sarah’s story could scarcely be more different. The Cork woman is one of the lucky ones and she knows it. “I am in no way smug but I am very relieved,” she told The Irish Times. The cause of her relief is that this time last year she fixed her mortgage of €140,000 with Avant Money at a rate of 1.9 per cent and managed to get the paperwork over the line “just days before they started increasing their rates”.

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She bought the house for about €230,000 in 2019 and had been on a variable rate with Ulster Bank before fixing. She had some money saved that she had planned to put into house renovations but when construction prices soared in the post-Covid period she decided instead to put it into the mortgage which allowed her LTV [loan-to-value] ratio to qualify for Avant Money’s lowest fixed rate.

“I do feel very relieved and kind of like I have got away with something by accident. I wasn’t clued in enough to realise how bad it was going to get; I’m horrified at what’s going on,” she said.

Her partner is looking to buy in Cork at present and as a result of rising rates will end up paying hundreds of euro more each month in repayments to buy a similar property to her own.

“I can’t believe really how lucky I was. And to get it over the line before that first rate hike I think for me it was probably better that I didn’t really have a firm grasp on how bad it was getting because I would have just been completely freaked.”