Permanent TSB is the latest lender to hike its mortgage rates in response to recent rate hikes from the European Central Bank.
Permanent TSB (PTSB) has become the latest lender to hike its mortgage rates.
It’s increasing all of its fixed rates by 0.75 percentage points from today.
It's the third time that it's hiked its rates since November. With even more hikes likely over the coming months.
Here's what you need to know...
Permanent TSB's new rates
From today all PTSB's fixed rates are going up by 0.75 percentage points.
The move means many of PTSB’s fixed rates for a standard first-time buyer will now be over 4.50%.
For example its two-year fixed rate for those with a 10% deposit will now be 4.60%. And its seven-year rate for those with a similar sized deposit will be 4.90%.
PTSB’s lowest fixed rate remains its four-year rate for those with at least a 40% deposit, which is now 3.90%. However this time last year the rate was just 2.05%, underlying how rapidly rates have gone up in a short space of time.
For someone borrowing €300,000 over 30 years, the latest increase will add around €130 to monthly repayments.
However PTSB's variable rates for both new and existing customers will remain unchanged for now.
What if I'm in the middle of applying for a mortgage?
If you're in the process of applying for a mortgage with PTSB and have received an official offer letter, you have until 2nd June to fully draw down your mortgage and avail of PTSB's current rates.
But if you apply for a mortgage today or draw down your mortgage after 2nd June, the new, higher rates will apply.
Deposit rates going up
In slightly better news, PTSB is also increasing its rates for savers - but not by much.
The rate paid on its Online Regular Saver Account for amounts up to €50,000 will increase by 0.35 percentage points to 0.75%.
The rate on its 21-Day Regular Saver Account for amounts up to €50,000 will increase by 0.35 percentage points to 0.75%.
And the rates on its fixed-term deposit accounts will increase by between 0.20 percentage points and 0.50 percentage points.
Why are rates going up?
The hike comes in response to a big increase in interest rates from 0% to 3% by the European Central Bank (ECB) since July in an effort to combat high inflation.
However, even after this latest increase from PTSB, it's only passed on just over half the recent ECB rate increases. But this ‘generosity’ has largely come at the expense of savers who are still getting some of the worst savings rates in all of Europe.
What's to come?
Looking forward things don’t look great for those on trackers, variable rates or people who are looking to buy over the coming months.
The ECB is almost guaranteed to hike rates by another 0.50 percentage points next week and by at least another 0.25 percentage points before the end of this summer. This will take the main lending rate to 3.75%, though it looks increasingly likely that it will go even higher. This means yet more rate increases from all lenders are guaranteed over the coming months.
Up until the middle of last year, it was possible to get a mortgage rate as low as 1.90% in Ireland - albeit with several caveats. By the end of the year, the cheapest rate is likely to be over 5%, with the average rate even higher. The impact this will have on affordability for first-time buyers will be huge.
For example, borrowing €300,000 over 30 years at 5% will cost €1,610 a month or around €500 more each month compared to someone borrowing the same amount at 1.90%. Borrowing €300,000 at 6% will cost almost €1,800 a month or around €700 extra each month.
These are big sums of money. The question is whether buyers can afford the higher repayments or whether house prices will fall instead, which we discuss in more detail in this article here.
Warning for those already on fixed rates
Today’s news obviously won’t affect anyone who is already on a fixed rate. However when current fixed-rate mortgage holders come to the end of their current agreement, they're likely to be faced with much higher rate options which they may not be budgeting for.
If you're on a fixed rate and have only a year or two remaining, you should chat to a mortgage broker like bonkers.ie about your options. In some cases it may be better to come out of your fixed rate early and re-fix while rates are still relatively low.