Mortgage interest rates may be set to rise, according to an expert, after ICS became the first provider to increase its fixed rates.
ICS Mortgages has announced a rate increase on all of its fixed mortgage rates with immediate effect.
The rises are a result of the increased cost of funding from the capital markets on which ICS is reliant.
Martina Hennessy, managing director of mortgage advice company doddl.ie, said: “After experiencing mortgage rate decreases for a number of years, the uplift by ICS Mortgages is a reminder that we are in a low rate environment, with mortgage rates the lowest they’ve been for over 12 years.
“Upward pressure on funding costs could result in other lenders also increasing rates in the not too distant future.
“These rate increases, while unwelcome, are reflective of volatility in global capital markets on which ICS, as a non-bank lender, are reliant for funding.
“The current low rate environment plus rising home values present an opportunity for mortgage holders to lock in lower rates and safeguard against the rising cost of living in general.
“Some 98 per cent of doddl.ie clients are fixing their mortgage, with fixed rates currently lower than variable ones.
“Purchasers value the security over repayments that fixed rates provide and switchers tend to have a strong loan to value so can lock in some of the really low fixed rates on market, which start at 1.95 per cent.”
ICS Mortgages specialises in mortgages for public sector workers.
The increase of 0.2 per cent on ICS’s three-year fixed rate up to 90 per cent finance results in an increase in repayments on every €100,000 borrowed over a 30-year term of €11 per month.
The average first-time buyer mortgage drawn down last quarter was €247,790, so the increase would result in a €26 per month increase in mortgage repayments.
“Even with new rate increases ICS still remain competitive relative to some of the pillar banks, with three-year fixed rates ranging from 2.25 per cent to 2.55 per cent and five-year fixed at 2.4 per cent to 2.69 per cent,” Ms Hennessy added.
“This compares to whereas the pillar banks offer these rates at up to 3 per cent.”
The differential between the highest and lowest rate on market now stands at 2.55 per cent, which represents a potential saving of €135 per month for every €100,000 repaid over a 25-year period.
