ICS Mortgages announces another interest rate hike

Non-bank lender says move reflects ongoing upward pressure on cost of financing

This is the third time ICS has raised its fixed rates this year after hikes in March and May. Photograph: iStock

ICS Mortgages is to increase its fixed rates for new owner-occupier mortgages by 0.5 per cent from next month. The nonbank lender, which commands about 5 per cent of the Irish mortgage market, said the increase would apply to all loan-to-value (LTV) bands but obviously not to existing customers on fixed-rate contracts.

This is the third time that ICS, which is owned by Dilosk, has raised its fixed rates this year after hikes in March and May. ICS’s variable rates, which it increased by 1.25 per cent recently, remain unchanged.

“These fixed rate increases reflect the ongoing upward pressure on the cost of financing fixed interest rate products and the evolving interest rate environment,” the company said in a statement.

The move is expected to be followed by other mortgage providers, heaping further financial pressure on Irish households at a time of surging energy and food costs. So far most of the main lenders here have not changed their variable rates in response to the European Central Bank’s rate hikes but that is expected to change in the coming weeks and with the ECB planning another rate increase in October.

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First-time buyers with a 10 per cent deposit who want to avail of ICS’s five-year fixed rate will now pay a rate of 4.19 per cent as opposed to 3.69 per cent previously and just 2.5 per cent back in March.

This means a first time-buyer borrowing €250,000 over 30 years will now pay around €1,210 a month compared to €1,140 a month previously, Daragh Cassidy from price comparison website bonkers.ie said. At the start of the year they would have been paying just €984 a month.

Movers or those with a 20 per cent deposit will now pay €1,197 a month compared to €1,128 a month previously. “Before March’s hike, they would have been paying just €946 a month — a difference of €251 a month,” Mr Cassidy said.

“All eyes now are on the main retail banks: AIB, BOI and PTSB to see when they’ll increase their rates. They’ve absorbed all of the ECB’s 1.25 per cent rate hike for their non-tracker customers so far” he said.

“However, when the ECB next meets at the end of October it’s likely it will raise rates again by at least 0.5 per cent. It’s at this stage the banks are likely to review their rates,” he said, while suggesting that anyone on a tracker or variable rate should look into locking into a long-term fixed rate while there’s still good value.

“With the cost of living on the rise and gas and electricity bills at record levels, the last thing households want to have to contend with is rapidly rising mortgage costs. However that’s what households are facing over the coming months as interest rates start to really rise,” Mr Cassidy said.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times