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Irish Independent
Irish Independent
Charlie Weston Twitter Email

Property prices rise in tandem with loan rate increases – and that is before ECB’s new hike

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House prices continue to rise in tandem with mortgage rate hikes, pushing the prospect of buying a home farther away for thousands of people.

A new increase to be announced today by the European Central Bank (ECB) will send the cost of home loans and fixed rates soaring.

People whose mortgages were sold to vulture funds and who are already paying the highest rates in the State are bracing for another big hit.

An ECB rate rise of 0.5 percentage points is expected, meaning the cumulative impact of the four rate rises will be close to €3,000 on a typical tracker mortgage.

New figures demonstrate the importance of the so-called Bank of Mum and Dad in getting a house deposit together for those lucky enough to have parents who can leave them an inheritance.

The Central Statistics Office (CSO) said more than a third of Irish households have received at least one inheritance or substantial gift at some point.

Thirty per cent received an inheritance and 9pc received a gift. The median or mid-point value of these intergenerational wealth transfers was €80,200 among recipient households.

A recent CSO publication found buyers are getting older, with a significant rise in the number buying jointly. Over the past 10 years, the proportion of joint purchasers has jumped from 47pc to 60pc.

The median age for sole buyers rose from 34 to 41.

Rachel McGovern, Brokers Ireland’s director of financial services, said: “This demonstrates the huge social change happening in our society because we seem to be unable to build enough homes and do so at affordable prices.”

The ECB is expected to increase rates by 0.5 of a percentage point when it meets this week.

More hikes from all lenders are likely to follow over the coming weeks. Central Bank of Ireland governor Gabriel Makhlouf has already warned of another hike of 0.5 percentage points.

If this is announced within the week, it will mean the annual cost of repayments on a €200,000 mortgage will have shot up by close to €3,000 in a year.

Close to half-a-million mortgage-holders in Ireland are on variable or tracker rates and so are vulnerable to higher rates.

People whose loans were sold by the likes of Permanent TSB – with the mortgages now serviced by lenders such as Pepper and Start – have recently been told their rates have already gone as high as 6.5pc, with some now at 7pc.

They have no option to fix, prompting consumer advocates to say they are “mortgage prisoners”.

Mr Makhlouf, who sits on the ECB governing council, said this week that the ECB is likely to raise interest rates by 0.5 percentage points next week.

Such a rise will add €50 a month to the cost of repaying a €200,000 tracker on a 25-year term. Over a year, that works out at an extra €600.

Another increase in the ECB rate means the four rises this year will have seen the cost of repayments on such a mortgage rise by €2,900.

Property prices have continued to rise despite mortgage rate hikes and the spiralling cost of living making buying a home more difficult, but the rate of increase is slowing.

CSO figures show prices increased by 9.8pc in the year to October.

It is the first time the national growth rate in prices has been in single figures in 14 months.

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