New research shows that Irish mortgage holders are uniquely vulnerable to rising interest rates compared to many of their EU counterparts, because of the prevalence of variable rate mortgages.
This follows the Financial Services Ombudsman's warning yesterday that lenders should not try to move people off low-rate tracker mortgages to higher interest variable ones.
According to figures from the European Mortgage Federation, 84% of mortgages issued in Ireland in the last six months of 2009 were variable.
The Irish Mortgage Corporation warns that this makes Ireland one of the most sensitive mortgage markets in the EU, as long-term fixed-rate home loans are more common in the rest of the union.
In Germany almost one quarter of home loans issued are fixed for more than ten years. Up to 80% of home loans in Belgium are fixed for the duration of the loan. Other markets, like the US, have caps on the potential rise in interest charged on variable mortgages.
The Irish Mortgage Corporation says the lack of rate caps here means customers have little protection against rising mortgage costs and little time to adjust their household budgets to higher monthly payments.
In the last year Permanent TSB has put its rates up three times, by a total of 1.5 points, EBS by 1.2 points, while other lenders have all put their rates up by 0.5 points. This is in advance of any rates increase at the European Central Bank, whose rates have been at 1% since May 2009.
According to the regulator's latest figures, 32,000 mortgage holders are now more than 90 days in arrears on their mortgage payments.
