An early rise in fixed-rate mortgages by lender ICS Mortgages signals the end of Ireland’s long cycle of house lending cuts as soaring global inflation takes its toll.
ICS, which is owned by Dilosk, had hinted in recent weeks that it would be forced to raise mortgage rates, but made its decision months ahead of other banking rivals because it takes its wholesale funding from a smaller group of investors.
Financial markets are betting that the ECB will begin to tighten eurozone interest rates in the coming months to respond to inflationary pressures that have been aggravated by the war in Ukraine.
This suggests that dominant lenders AIB, Bank of Ireland and Permanent TSB, as well as much smaller rivals like Avant Money, all of which are bank lenders in their own right, will also raise rates if the ECB decides to raise official rates. .
The ICS decision “is going to make people nervous” that major lenders will raise their mortgage rates later this year, said Michael Dowling, a senior mortgage broker.
Mr Dowling said ICS, which has long had ambitions to grow its current market share of around 3%, had to act at an early stage because of the way it sources wholesale funds. It will still have growth ambitions with the departure of Ulster and KBC, which together hold around 25% of the mortgage market.
ICS said it immediately raised all of its three- and five-year fixed rates in all loan-to-value brackets, but that its “low, market-leading variable rates remain unchanged.”
The cost of its mortgage fixed over three years for new customers borrowing up to 90% of the value of the property (a reference for first-time buyers) goes from 2.35% to 2.55%.
The cost of a similar but fixed five-year ICS home loan goes from 2.50% to 2.69%.
“These fixed rate increases reflect the significant upward pressure on the cost of funding fixed interest rate products in international markets,” said Ray McMahon, chief commercial officer of ICS. is being felt across Europe and the world,” said McMahon.
Most commentators believe global central banks will continue with rate hikes this year, despite the damage done to growth in major economies by the war in Ukraine.
“Central bankers’ response to soaring global commodity prices, and the war in Ukraine more generally, will be highlighted this week, with decisions from scheduled policy meetings in the US, UK and Japan,” said Neil Shearing, Managing Director. economist at Capital Economics, in a comment.
“Just a few weeks ago, there was a healthy debate in the market about whether the Federal Reserve would start its tightening cycle with a 50 basis point move, or even a surprise hike between meetings,” he said. said Mr. Shearing.
“There is no doubt that the war in Ukraine has changed the terms of this debate, but they have not changed too much. In advanced economies, we still believe that politics will be largely tightened this year, and we do not I don’t think the peak in interest rates in this cycle is likely to change much,” he said.