The Governing Council of the European Central Bank has increased the ECB key lending rate by 50 bps today from 2.5% to 3%. For context, The Bank of England has also announced a rate increase today of 50 bps bringing their base rate to 4%.
Previously at its December meeting, the ECB stated that it expects inflation to decrease to 6.3% in 2023, then decline further to an average of 3.4% in 2024 and 2.3% in 2025. One might therefore expect interest rate hikes to continue.
The knock-on effect of today’s increase will see a tracker mortgage (ECB + 0.95) with an amount outstanding of €500,000 and 20-year term remaining increase from €2,887 pm to €3,017 pm which is a 4.5% increase in monthly repayments. More significantly this is a 32% increase on repayments since July 2022.
The new ECB rate of 3% will impact the current rate offerings from Irish lenders with AIB already having announced this afternoon a rate increase of between 25 – 75 bps. Over the coming days and weeks it can be anticipated for other lenders to follow suit but right now the lowest lending rate is a 4-year fixed for 2.90%. (T&C’s apply)
At Biograph Wealth Advisors we have an experienced mortgage advisory team who are available should you require advice on the above.