If you have a mortgage, now is a good time to review it. Whether you’re coming off a fixed rate, rolling along on a variable, or maybe you’ve been clinging to a tracker, complacency could cost you.
In case you missed it, the European Central Bank (ECB) hiked interest rates last week. The move sees its key rate increase by 0.25 percentage points to 2.50 per cent, while the rate off which tracker mortgages are priced has gone up to 2.65 per cent.
This follows a previous quarter-point increase in June. By raising rates, the ECB hopes to get the current 3.3 per cent euro zone inflation rate back down to its 2 per cent target.
The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period, according to the bank’s governing council.
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For tracker mortgage holders, the hit to their monthly mortgage repayment will be immediate.
This increase means about an extra €15 a month on every €100,000 borrowed, says Margaret Barrett of Mortgage Navigators.
For someone with a €250,000 mortgage, that’s an extra €37 a month, or €444 a year – so it’s not insignificant.
“We will have clients experiencing an impact of €50 to €70 extra a month on their mortgage repayment,” says Barrett.
“People feel that extra €50 or €70 a month.”
Those on fixed rates are shielded from the increase for now, while variable-rate customers will be waiting to see whether their bank passes on the pain.
The big three Irish lenders didn’t respond to the last ECB rate hike in June, keeping both their variable and fixed rates unchanged, says Darragh Cassidy of Bonkers.ie.
“And this has led Irish mortgage rates to fall below the euro zone average in recent weeks, which is rare for Ireland,” Cassidy has said.
AIB, Bank of Ireland and PTSB are less exposed to ECB rate changes because they fund a significant proportion of their lending through customer deposits.
“But I’m not as confident that they’ll absorb this second quarter-point hike, especially for their fixed rates. And they definitely won’t absorb a third hike, which is currently a small possibility before the end of the year,” says Cassidy of the next ECB meeting, scheduled for December.
“I’d advise anyone who is thinking of switching their mortgage to do it now, as they can avail of rates as low as 3 per cent,” he says.
Variable-rate mortgage holders, take heed.
“We still have a significant number of customers on variable interest rates, typically around 4.15 per cent,” says Margaret Barrett.
“I certainly can’t see the pillar banks sitting on this second or a third hike, which is likely at the end of the year. Be expecting interest rates to move in the next two to three months,” she says.
Variable-rate customers have to review their rate, she says.
“It’s not that they should – they have to. We are expecting that today’s interest rates will not be there in 12 months’ time. We are definitely heading into a rate environment of increases, not decreases,” says Barrett.
Coming off a fixed rate
If you are one of the lucky homeowners who locked in an ultra-low fixed rate a few years ago and you are about to come off it, then it’s time to act.
You have probably saved thousands on your mortgage with a rate starting with a one or a two – but the end of this fix means bracing yourself for a new world.
“If you are going to roll off of it in the next six months, then you have to start looking around now,” says Barrett.
The ECB has already moved twice this year, with potential for another move in December, she says.
“The average interest rate in Ireland is 3.4 per cent at the moment – that could easily be 3.8 or 3.9 per cent by January 2027 if rate increases are passed on to consumers,” says Barrett.
If you have just five years left, for example, you might want to give up the tracker and lock into a five-year fix for the certainty it gives you
The next phase in the Irish mortgage market is likely to require homeowners to be more engaged with their mortgage, says Ralph Marsh of SYS Mortgages.
“Don’t wait until your fixed rate expires before shopping around,” says Marsh.
You can start the process by pulling out your mortgage account number and phoning your bank. Remind yourself of your rate, your term and the balance outstanding.
If your fix is ending soon, jumping ship early to avail of rates before they potentially rise is an option.
A bank can charge a break fee for quitting a fixed rate early. The amount can depend on how much they calculate they will lose, if anything, by the arrangement ending.
Some banks might be quite happy to waive the fee to get you on to a more normalised rate.
Just know that quitting your lucrative low fixed interest rate could see your rate jump up by as much as 1 per cent.
“It’s about weighing up the risk factors – do you do it now, or hold on to it for a bit and see how the market reacts?” says Barrett.
One mortgage-holder who locked in a low 2.4 per cent rate with Bank of Ireland in 2021 is coming to the end of their five-year fix next year. They have about €240,000 outstanding on their mortgage, with another 13 years to go. They have a C-rated home.
The lowest rates available to them now are about 3 per cent, so not as low as what they are on, but still pretty good.
They are worried that if they hang on until the end of their fix before refixing, rates will have gone up even further.
[ Interest rates are rising. Here’s what it means for your moneyOpens in new window ]
If paying the break fee is tenable, rates catching their eye include a four-year fix at 3 per cent with PTSB. This would add about €47 a month to their mortgage repayment. It would give them certainty on their mortgage repayment until 2030.
With a B energy rating, they would be able to avail of a five-year fix with AIB at 3.2 per cent. This would add €70 to their monthly repayment, but give them certainty until 2031.
If they stick with Bank of Ireland, they could opt for a four-year fix at 3.2 per cent with that bank’s EcoSaver range.
If at any time during the course of that fix they complete retrofit works to uplift their Ber rating by one whole letter, their bank will apply a five basis-point discount for each letter jump.
For example, if their home went from a C to a B, their rate would drop from 3.20 per cent to 3.15 per cent for the remainder of their four-year fix. But that’s still not as low as PTSB’s 3 per cent rate.
If you are a former KBC customer who moved to Bank of Ireland, you may be in for a pleasant surprise. Bank of Ireland must honour the 20 basis-point discount in mortgage rate of KBC customers who were eligible for that discount at the date of their mortgage transfer.
In the example above, the customer’s four-year fixed rate would reduce to 2.95 per cent."
Trackers
If you’re a tracker mortgage holder, expect a letter in the post. AIB, Bank of Ireland and PTSB are writing to customers confirming their new interest rate and repayment increase.
Tracker rates are pegged to the main ECB rate, with a fixed additional margin applied by the lender. Most margins range between 0.5 per cent and 1.45 per cent, with an average of about 1.1 per cent.
For holders of the 130,000 of these loans still outstanding, this is the second ECB increase in the space of three months.
“If you combine today’s increase with the June rate hike, monthly repayments for a tracker mortgage customer are now between €24 and €28 a month higher for every €100,000 borrowed than they were prior to June 2026,” says Trevor Grant, chairperson of Irish Mortgage Advisors.
Having surfed the waves of interest rates for more than two decades now, should tracker-holders just keep going?
The remaining term of your mortgage and the margin will be a key factor in decision-making. Most tracker holders are well into their mortgage term now. If you have just five years left, for example, you might want to give up the tracker and lock into a five-year fix for the certainty it gives you.
Those with 20 years remaining will think differently.
Anyone paying a margin of 1 per cent or less is still getting a fairly good deal, says Cassidy.
Moving to a shorter-term fixed-rate product now will expose you to whatever the bank offers once the term of that fix ends. If rates are more competitive, this could work out, but if ECB rates fall and bank rates stay the same, it could look like an expensive financial mistake.
Whether you are on a fixed, variable or tracker mortgage, it’s always a good time to review your rate
Riding out the increases now, you will see the benefit of your tracker over the remaining term if and when rates start to ease off again.
If the ECB drops the rate again, it may take some time for banks to drop rates – except for trackers, where they must do so.
For those wanting long-term certainty over their rate, Barrett mentions Avant’s One Mortgage as an option.
“Trackers right now are no longer competitive, especially when we have the likes of the Avant One mortgage where you can fix for the remaining term of your mortgage for 3.4 per cent. That in my world is a headline rate,” says Barrett.
Interest rates start from 3.4 per cent for mortgage terms of 15, 20, 25 and 30 years. Overpayments of up to 10 per cent annually are allowed, there’s no fees for moving house, and it includes a 1 per cent cashback incentive for drawdowns in 2026.
Shop around
Whether you are on a fixed, variable or tracker mortgage, it’s always a good time to review your rate.
Rates may have gone up since you last talked to a bank, but time will have been your friend in other ways.
“You may have paid down some of the outstanding balance of the mortgage, while at the same time, the value of house prices has increased, potentially putting you in a more favourable pricing band,” says Marsh.
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Call your bank, and remind yourself of the rate you are on, the term of the mortgage and the outstanding mortgage balance.
The next step is to use the Property Price Register to find out how much properties like yours in your area have sold for. This will tell you your loan-to-value ratio – if next door sold for €600,000 and you have €300,000 left on the mortgage, your loan-to-value is circa 50 per cent.
Find out your Ber too – either by paying a Ber assessor to carry one out, or checking the national Ber register.
If you have done work to your home, increasing its building energy rating, or you plan to – this gives you access to more favourable green mortgage rates.
All of these things will have bolstered your eligibility to get a better rate.
Banks must now provide the deeds to your house within 10 days of your solicitor asking them to do so
Armed with this information, use a mortgage rate comparison calculator, like the one from the Competition and Consumer Protection Commission (CCPC), or contact a broker to see what rates are available to you.
Don’t focus exclusively on the rate, says Marsh – legal costs, cashback incentives and the flexibility of the mortgage (like a facility to overpay) all need to be considered too.
“Cashback can be attractive, but consider it alongside the repayment saving and the cost of switching,” says Marsh.
Whether you are switching to a better rate with your own lender or to a new lender, you will need to provide documents such as bank statements and salary certificates for them to assess your eligibility.
You’ll need to pay for an up-to-date valuation of your home if you are moving to a lower loan-to-value rate (the bank will likely provide a valuer), and a Ber cert, if you’re availing of a green rate.
If you are switching banks, you’ll need to engage a solicitor – legal and valuation fees will cost between €1,100 and €2,000.
Banks must now provide the deeds to your house within 10 days of your solicitor asking them to do so.
“Sometimes the right answer is to switch, sometimes maybe to stay,” says Marsh.
Shopping around will inform you whether it will pay to jump ship or lock in.
