Ulster Bank signals July mortgage increase


FRESH MISERY was heaped upon the shoulders of some mortgage holders yesterday after Ulster Bank announced its intention to increase its Standard Variable Rate (SVR) mortgage by 0.6 per cent from July 1st.

The move, which will add nearly €100 per month on to the cost of a €300,000 mortgage, will mean the SVR for existing Ulster Bank mortgage holders goes from 4.35 per cent to 4.95 per cent.

It is the second increase imposed by the bank this year. In March it increased its SVR from 3.85 per cent to 4.35 per cent. Someone with a €100,000 mortgage with the bank of 20 years will see their monthly payment increase from €624 to €657.

Last month marked the beginning of what is expected to be a sustained cycle of interest rate hikes across the euro zone with the European Central Bank (ECB) raising its key lending rate by a quarter of a point to 1.25 per cent. It was its first increase in more than two years and is expected to be the first of at least three rate increases over the next 12 months.

Director of PIBA Mortgage Services Rachel Doyle said the move announced by Ulster Bank was unwelcome, but hardly surprising given that “we’re in an upward rate cycle”. She said more rate increases were likely, with all lenders expected to follow the bank’s lead.

Ms Doyle added that variable rate mortgage holders in particular needed to review their situation. “They need to factor in the likelihood of double increases over the course of this year alone, a number of ECB increases and most likely consequent and separate increases by their lender.”

She warned that this year and next would be difficult for mortgage holders.

“The upward rate cycle is happening at a time when people are already under severe pressure with higher taxes and many with reduced incomes,” Ms Doyle noted.

Chief executive of the Irish Brokers Association Ciarán Phelan echoed her concerns and warned that the rate increase would not be affordable for many people.

Mr Phelan said that if the ECB also increases its rate towards the end of the year, as is widely predicted, “some variable mortgage rates could hit 6 per cent”.

He said that with thousands of families in long-term mortgage arrears “allowing the banks to increase the profitability of their captive mortgage clients is untenable”.

Almost 50,000 residential mortgages were in arrears at the end of March.

Moreover, the stock of repossessed homes held by lenders had risen to 692, according to figures released by the Central Bank.

The information showed that 49,609 home loans, representing 6.3 per cent of all private residential mortgages, were in arrears for more than 90 days at the end of March.

This compares to an arrears level of 5.7 per cent at the end of December. Close to 63,000 residential mortgages were classified as restructured by the end of the quarter. Of these, more than 26,000 had some degree of arrears.