Bank of Ireland hikes fixed mortgage rates for new customers following ECB move

Bank of Ireland said on Thursday that it is raising the cost of fixed-rate mortgage products for new customers by 0.25 of a percentage point, making it the latest mortgage lender in the Irish market to make a move since the European Central Bank (ECB) started hiking its interest rates in July.

Existing customers electing to move on to a fixed-rate product with the bank, and those rolling off fixed-rate periods, are not affected by the increase for the time being. A spokesman for the bank declined to comment on how long existing borrowers would continue to have this advantage over new customers, other than to say that it would be “kept under review”.

“In light of recent interest rate increases by the ECB, Bank of Ireland is today announcing an increase to new fixed rate mortgages of 0.25 per cent. This increase applies only to new mortgages,” said Alan Hartley, director of home buying at the bank. “Customers with existing mortgages with Bank of Ireland and who are considering refixing can still avail of unchanged fixed rates.”

New customers who already have a written quote from the bank for a lower fixed rate have until December 9th to draw down a mortgage on those terms.

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The move would see, for example, Bank of Ireland’s five-year fixed rate for a mortgage with a loan-to-value ratio of less than 80 per cent rise to 3.25 per cent.

The ECB has hiked its main lending rate from zero to 2 per cent in less than three months.

AIB, ICS Mortgages, Finance Ireland and Avant Money have each increased rates on certain products since the ECB first moved in July. Permanent TSB, the sixth continuing mortgage lender in the market, is widely expected to also increase its rates in time.

Irish banks have moved less aggressively on mortgage rates than domestic nonbank lenders and euro zone peers in recent months because their loan books are mainly financed by deposits, which are earning little or nothing for savers, while the wider sector is more exposed to market financing, where borrowing costs have spiked in anticipation of a raft of ECB rate increases over the near term.

The difference between the average new Irish and euro zone home loan rates has contracted sharply in the past year, according to data published by the Central Bank on Wednesday. The Irish average was 2.58 per cent in September, having fallen 0.14 of a percentage point over the space of 12 months. The euro zone average rose by 1.13 points to 2.4 per cent.

“The [data] series is somewhat of a trailing indicator, particularly for mortgages, where rates were entered into one to two months in advance of drawdown,” said Davy analyst Diarmaid Sheridan.