The war in the Middle East could lead to a rise in interest on home loans, mortgage brokers have warned, after new data from the Central Bank showed rates were unchanged in January.
The weighted average interest rate on new mortgages in January stood at 3.5 per cent, unchanged from the previous month, and down 32 basis points annually.
The equivalent euro area average was 3.39 per cent as Ireland fell from the sixth to seventh costliest country for home loans in the euro area.
Brokers Ireland deputy chief executive Rachel McGovern said that while mortgage rates have improved over the past year, the war in the Middle East represents “a new threat on the horizon” with “potential to impact interest rates”.
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Irish Mortgage Advisors chairman Trevor Grant said the US-Israeli war on Iran could set in train a series of events which will see mortgage rates “rising rather than falling”.
“There are growing concerns about the possible impact of the Middle East conflict on mortgage borrowers,” he said.
“A prolonged war in the Middle East could lead to a substantial spike in euro zone inflation and the ECB could increase its interest rates to combat that, with many mortgage borrowers coming under pressure as a result.
“It’s hard to know how long the Middle East conflict will last but if it drags on and inflation continues to rise, there may well be merit in borrowers fixing their mortgage as doing so will help shield them from potential interest rate rises.”
The Central Bank data also showed savings rates on household overnight deposits, in which people hold over €147 billion, increased by one basis point to 0.14 per cent. McGovern described the rate as “appalling low”.
“The caution Irish people have been showing has, alas, proven to be justified,” she said, adding that the savings and investment plan promised by the Government will be “eagerly awaited”.
“As inflation grows savers are increasingly losing value by leaving their savings in such poor value products,” she said.
“Whatever system the Government brings in should be appealing to, and easily understood by, a public wounded by the financial crash and experience with Eircom shares.”
Both McGovern and Grant urged mortgage-holders who have not switched in recent years to consider shopping around for savings.
“With the PTSB sale process now well in train, a takeover of PTSB in the coming months could lead to more intensified competition in the market,” Grant said.
“A new owner might decide to challenge the other banks and this could lead to lower mortgage rates for borrowers.”
