ECB raise interest rates for first time in 11 years

DUBLIN: The European Central Bank is set to raise interest rates for the first time in 11 years amid rising inflation and the threat of gas supply cuts. Inflation is around 8.6% across the eurozone and 9.1% in Ireland, so the ECB is under pressure to raise rates.

The bank’s policymakers have committed to raising interest rates by at least 0.25%, but the ECB is likely to go further and opt for a 0.5% increase. It is also expected that the increase will be 0.75% by the end of the year. The new move will end an extraordinarily long period of stable and historically low and even negative rates.

With the ECB raising interest rates, a low-cost mortgage may just be a dream. Mortgages remain a huge burden throughout life, experts say. However, they say raising interest rates will not solve the crisis the ECB is facing now. Energy costs will continue to rise due to the problems left by the Russia-Ukraine war, while fears of a Europe-wide recession with rising interest rates, war, inflation and inflation are very strong.

Families will suffer…

It is estimated that a household with a 250,000 tracker mortgage will pay an extra €1,200 a year with the rise in interest rates. In addition, each family will incur an additional cost of €4,000 per year in energy, motor fuel and food costs.

About half of mortgage holders are currently on fixed rates, but mortgage rates will increase as their fixed term ends. About 200,000 households with variable-rate mortgages are estimated to face a huge increase in home loan costs.

Irish mortgage rates in Ireland are among the highest in the Eurozone. But the banks here will also have to increase the rates.