MORTGAGE HOLDERS HAVE been advised to “urgently review” their interest rates ahead of an expected hike by the European Central Bank next month.

In March, Irish mortgage rates rose for the second month in a row, according to new data from the Central Bank.

The average mortgage rate for March was 3.52%, up marginally from 3.51% in February and 3.50% in January.

It means Ireland has the seventh-highest mortgage rates in the Eurozone.

However, there are fears of wider rate increases if the European Central Bank hikes rates, as it is expected to over the coming weeks.

At the end of April, the ECB held interest rates steady but signalled a possible increase as it warned of mounting risks to growth and inflation due to the war in the Middle East.

The ECB held its key deposit rate at 2%, where it has been since June last year, but it’s understood this rate could be hiked next month.

Daragh Cassidy of price comparison site bonkers.ie noted that during the last energy crisis following Russia’s invasion of Ukraine in 2022, the ECB increased rates by a 4.5% in a short space of time.

“While another hike of this scale is highly unlikely, the ECB can, and will, act if it feels inflation is getting out of control again,” said Cassidy.

He told The Journal that while there had been hopes at the start of the year that mortgage rates might fall slightly, the conflict in the Middle East has “really changed all that”.

It’s thought the ECB could hike interest rates three times by the end of the year, with an increase of 0.25% each time.

If that were to happen, that is likely to put upward pressure on mortgage rates.

“For now, the main Irish lenders haven’t increased their mortgage rates, but if the ECB hikes rates in June and then again later in the year, the fear is they will increase some of their rates.”

Cassidy said if the ECB increases rates “just once, it’s not a guarantee the main banks will follow”.

“They could decide to waive some of their profits or reduce their savings rates instead.”

However, if the ECB hikes rates twice, or three times, then Cassidy warned of a “reaction from the main lenders”.

“We’ve seen some of the smaller lenders hike their fixed rates already,” said Cassidy, pointing to an increase in recent weeks for new customers to ICS Mortgages and Nua Money, two of the smaller lenders in the market.

Cassidy said anyone coming off a fixed rate over the coming months should “start looking at their options carefully”.

It’s understood around 40,000 customers are coming off fixed rates this year.

“There are thousands of mortgage customers who took out fixed rates as low as under 2% three or four years ago,” said Cassidy.

These customers can expect a big hike in their repayments when they come to re-fix, especially if they don’t compare all the options on the market.

He said these people will face a big hike in repayment outside any rate increases from the ECB.

He noted that banks have to issue a notice eight weeks in advance of the end of a fixed rate and that people should engage with this as soon as possible.

“I’d recommend going to a broker, telling them your options, and they’ll be able to advise you whether it’s a good option to switch or remain with your current lender.”

Cassidy meanwhile people should look at switching their mortgage at least once.

“You should not just take out a mortgage and have it with the same provider for 20 or 30 years and never look at it.

“Whether switching mortgage is suitable for you will depend on a few things, so it’s always tough to say whether switching mortgage is suitable for everyone.

“But it definitely will be suitable for some people and this is where going through a broker comes in and they’d be able to say, quite quickly, whether it would be of benefit to switch.”

Elsewhere, Michael Dowling of Irish Mortgage Brokers told The Journal that the impacts of any ECB hikes would be felt “immediately” for those on tracker mortgages, of which there are around 110,000 customers, as their interest rate is directly linked to the ECB base rate.

A 0.25% hike would add around €13 to a monthly repayment for every €100,000 owed, according to Dowling.

Should there be a 0.75% hike by the end of the year, that would mean an extra €39 per month.

Meanwhile, Dowling encouraged people on fixed rate mortgages which are ending this year to contact their bank first and ask if there is a penalty for breaking the fixed rate today rather than waiting until it expires.

If there’s no penalty, Dowling said they should contact a broker to work out if it is worthwhile breaking the fixed rate now, rather than waiting until the end of the term when it will likely be higher.

He noted that there are costs in moving from one bank to another, which usually come to around €1,000 in total.

But Dowling said there are a lot of incentives from banks to encourage people to switch.

“If it’s worth your while in switching, a regulated broker will be able to advise you what those incentives are, such as cash backs,” said Dowling.

The bottom line is, you need to get advice from somebody who’s regulated and has access to the entire market.

“In a lot of cases, it might be that you stay with your existing lender, but equally, there may be opportunities to switch to another lender.”

Elsewhere, Brokers Ireland warned that “the window is likely closing on lower interest rates, given geopolitical uncertainty and the consequent rising of inflation”.

Rachel McGovern, Brokers Ireland deputy chief executive, advised all mortgage holders who had not reviewed their mortgage rate to do so “urgently”, particularly those who have not reviewed it in recent years.