The European Central Bank is widely expected to announce an increase in interest rates this afternoon.
The current rate of 2% is likely to rise to 2.25% as the bank battles rising inflation as a result of higher energy costs due to the Middle East conflict.
It will be the first increase since 2023, following the energy price shock caused by Russia’s invasion of Ukraine a year earlier.
The ECB’s decision will quickly result in higher repayments for Ireland’s 110,000 tracker mortgage customers.
It also means a shift in the wider interest rate environment, putting upward pressure on other home loans and borrowing costs generally.
A 0.25% increase on a €300,000 mortgage over 25 years would add €37 per month to repayments.
Many people shopping for mortgages now look at fixed rates offered by Irish banks as they offer better value than variable loans.
Generally rising interest rates mean that new fixed term loans will increase over time.
That will affect new customers and those who have come to the end of an existing fixed loan and wish to take out another.
Observers believe that today’s expected rise is likely to be followed by at least one further increase this year, possibly in September.
The ECB has a target of keeping inflation at 2%, however, the increase in the cost of living is running at 3.2% among the 21 countries which use the euro. In Ireland it was estimated to be 3.5% in May.
But the move by the ECB will benefit savers – provided banks pass on the rate increase.
Financial institutions frequently do not increase returns for all saving products when central banks put up rates.
Savers are advised to bear this in mind and use it as an incentive to shop around for the best deal available.
