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 increases are a result of the increased cost of funding from the capital markets on which ICS are reliant.
“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,” said Martina Hennessy, Managing Director of mortgage advice company doddl.ie.
“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.
“98% 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%.”
ICS Mortgages specialise in mortgages for public sector workers. The increase of 0.2% on ICS’s 3-year fixed rate up to 90% 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 3 year fixed rates ranging from 2.25% to 2.55% and 5-year fixed 2.4% to 2.69%. This compares to whereas the pillar banks offer these rates at up to 3%,” adds Ms. Hennessy.
The differential between the highest and lowest rate on market now stands at 2.55% which represents a potential saving of €135 per month for every €100,000 repaid over a 25 year period.
When choosing a mortgage rate it is important to note that the rate you are eligible for is the rate at date of drawdown. ICS however has noted its lower pre increase rates on all valid loan offers.