FIXED rate mortgages are unlikely to get cheaper over the coming months as banks and building societies react to growing uncertainty in interest rate markets.
Profit margins are already being squeezed because of the rise in long term interest rates on bond markets.
The five year Irish bond traded around 7.2 per cent yesterday, compared to 6.8 per cent before the current market upheaval. This increases the cost to banks and building societies of borrowing funds to lend on to customers as fixed rate mortgages.
AIB introduced new five and 10 year fixed loans last Wednesday and its margins will now be coming under increasing pressure, according to its home mortgage financial controller, Mr Christy Flynn.
Mr Michael Torpey, treasurer at Irish Permanent, said a continued weakening in bond markets would limit the availability of fixed rate loans.
However, the outlook is brighter for the bulk of borrowers who are on normal variable interest rates. While long term rates are rising, a further reduction in short term rates may be on the way. Mr Torpey insisted that variable mortgage rates are "safe for a time". If the Bundesbank cuts rates again we will see a quarter point off Irish variable retail rates, he said.
