Mortgage Interest Rates have taken another hike up to a new base rate of 4% as of
two weeks ago. This will mean that all mortgages on a variable rate and all mortgages on a tracker rate will now cost more per month than they did previously.
The difference will be about €21 per hundred thousand borrowed.
Given that the average house price in dublin is now over four hundred thousand that equates to mortgages being – for first time buyers in particular who would not have a low loan to value – about €80 more per month.
This is the eighth interest rate rise since december of 2005 so mortgages are getting more expensive almost every quarter. For some people this is adding up to an extra €650 per month compared to what they were paying for their mortgage this time two years ago.
Mortgages, much like any other form of credit such as personal loans or credit cards are affected every time the ECB (european base rate) goes up or down. Property purchases were much more affordable when rates were low because the money you would borrow costed less to service. As well as that prices were lower, property prices have risen but so have interest rates hence the first time buyer is now starting to get priced out of the market.
The recent abolition of stamp duty will go some way towards giving first time buyers the ability to enter the market but the mortgage interest rates and the property prices – which as mentioned have risen while interest rates have been rising- will push many new entrants to the hilt or beyond.
All of this will equate to a slow down or calming in the market, that is certain, the concern over and above that is the fact that sub-prime lending is growing at a rapid rate, this is lending for people who have bad credit or are in arrears for existing loans. This can happen for any number of reasons, a change in their personal situation such as a seperation or death in the family, getting laid off, or
simply borrowing more than you can adequately repay, at any rate, there will be a new traunch of lenders classified as ‘sub-prime’ because intreste rates cause an upsurge in not just mortgages but also in all forms of credit as previously mentioned so the overall debt burden becomes greater.