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A rise in mortgage interest rates could affect thousands

As if things weren’t bad enough homeowners are now facing even more pain as interest rates are increasing even more. AIB’s chief executive warns of the future plans to increase variable rates. This move from AIB is set to spark a rise in the variable rates from other lenders also. Therefore around 300,000 people with variable home loans will be affected. AIB alone have around 70,000 customers who have variable rates.

Breaking this charge down basically means that every 0.25pc rise in rates adds €30 a month to the cost of repayments on every €200,000 borrowed. The new rise in rates will send the number of residential customers in arrears soaring. 

According to Broker Michael Dowling of Abacus Finance in Dublin all the lenders are all set to raise their rates but they just don’t want to be the first one to make the move. But sure enough once one goes ahead, they will all follow.

The banks want to see the average variable rate rise from 4.3pc to 5pc which would add around €1,000 a year to the annual repayments on a €200,000 mortgage.

The Government have now wiped their hands clean  of the mortgage rates even though in the past they put pressure on lenders to reduce these variable rates. In 2012 AIB brought in two rises of 0.5pc each.

David Duffy, AIB’s boss said that the bank would contact all those in arrears and offer them a deal to reconstruct their mortgage payments by the summer.

AIB Boss David Duffy

David Hall, of the Irish Mortgage Holders Association claims that Mr. Duffy had offered very few, if any distressed borrower’s long-term restructuring and when they were asked how many mortgage holders had been offered deals the AIB spokeswoman said she had no figures at the moment.

So the bank that the state has given €21.5bn to claims that its variable rate is one of the lowest on the market.

On the contrary there was a large increase in the number of mortgages that were issued in the last three months of last year. This was mainly due to buyers who were struggling to avail of mortgage tax relief. This has since been removed.

In 2012 nearly 16,000 mortgages were drawn down which totalled €2.6bn. This is the first annual increase we have seen since 2006.

Experts in the area have made their predictions that around €4bn worth of new mortgages will be issued this year.

Bank of Ireland, AIB and Permanent TSB have stated that they will increase their home-loan lending. Dermot O’Leary of Goodbody Stockbrokers said AIB and Bank of Ireland alone are committed to issuing €2bn each in mortgages this year.

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