MORE PRESSURE is likely to be felt by the State’s mortgage holders in the coming weeks as the main lenders unveil a raft of rate increases which could see a person with an average home loan worse off to the tune of more than €2,000 a year.
While none of the main lenders would be drawn on the timing and scale of the mortgage increase yesterday, informed sources said Permanent TSB, the largest player in the home mortgage market, is likely to be first out of the blocks.
A Permanent TSB spokesman insisted yesterday that no decision had yet been made on the timing or the scale of any mortgage rate increases, but sources confirmed one was likely within days and it could be as high as 1 per cent.
If the move is confirmed, it will be the bank’s fourth rate increase since August 2009 and if it is, as widely expected, 1 per cent it will make it the largest rate increase in a single step. It will mean the bank has increased its standard variable rate (SVR) by 2.5 per cent in less than two years.
“Money is very tight for all the banks and rate increases are inevitable,” an industry source said. “If the bank were to increase rates by 1 per cent they would certainly get some flak but at least they would get the year’s increases out of the way in one go.”
For every €100,000 owed, a 1 per cent increase will add €61.60 to monthly repayments and on a €300,000 mortgage, the increase will mean an additional €184.80 per month, or €2,217.60 annually.
While these figures will make for grim reading for someone with a variable rate of that magnitude, the reality is the increases will be less significant for most people as those with higher mortgages taken out over the last decade tend to be either on tracker or fixed rate mortgages and will not be negatively affected by any increases.
“Permanent TSB has experienced higher levels of mortgage arrears when compared to the national average,” financial adviser Frank Conway said.
“It has also been the most aggressive at increasing interest rates for its standard variable rate customers,” he added, and warned that a rise is likely to cause “a further spike in arrears for that lender”.
Mortgage arrears continue to be a major problem in the Republic and Central Bank statistics suggest that there are more than 40,000 mortgage holders who are 90 days or more in arrears on their mortgage repayments.
The European Central Bank is widely expected to increase its base rate of lending by September, which will further push up borrowing costs for all standard variable and tracker mortgages later this year.
Penal reform fines legislation
The Irish Penal Reform Trust has called on an incoming government to commit itself to enacting legislation ensuring that the practice of imprisoning people for non-payment of fines is brought to an end, and to ensure the full operation of the Fines Act.
The trust was responding to figures released by Minister for Justice and Law Reform Brendan Smith indicating that 6,681 people had been imprisoned for non-payment of court ordered fines in 2010.
Trust executive director Liam Herrick said the imprisonments were despite the signing of the Fines Act 2010 into law on June 2nd, 2010. “The full commencement of this legislation, along with the passing of the Criminal Justice (Community Service) (Amendment) Bill 2011 at the earliest possible date by the next Government, are critical to addressing the chronic overcrowding and consequent impact on inhumane conditions in Irish prisons,” he said.
Eight months after the legislation was signed into law and almost 11 months after the Fines Bill was passed by the Dáil, the fines legislation has still not yet fully commenced because the Courts Service is not ready to facilitate the payment of fines by instalment, he said.