Homeowners across Ireland face interest rate rises on April 7 when the European Central Bank is expected to up its rates.
ECB officials indicated on March 22 that the economic uncertainty caused by Japan’s earthquake may not deter them from the widely-expected hike on April 7.
The ECB is at a record low of 1% since May 2009 but pressure is growing to dampen accelerating inflation in the eurozone, particularly in Germany.
An interest rate rise is likely to affect all 600,000 of the 789,000 homeowners in Ireland who are on standard variable or tracker mortgages.
For the 350,000 of those on tracker mortgages, it will be first interest rate in almost two years.
An increase of 0.25 per cent will mean an increase of roughly €15 a month per €100,000 for those on tracker mortgages which are legally linked to the ECB rate. So those with a €300,000 mortgage will face extra payments of €135 a month.
Those on variable mortgages however could face higher increases if the banks use the ECB rate rise to pass further costs on to the customer.
How often will ECB rate rise in next two years?
Economists expect rates to go up to between two and three percentage points between now and the end of 2012.
Previous interest rate rise cycles which started in 2000 and then 2005, the ECB typically introduced a rise every two to three months.
"The ECB does this in a very measured way. It will still be concerned about weaker economies such as Ireland, Spain and Portugal," said Frank Conway of the Irish Mortgage Corporation.
A Reuters poll late last month showed a majority of economists expect the ECB will hold fire on raising rates until at least October, though an increased minority saw a hike in the third quarter
Euro zone inflation quickened in February to 2.4 per cent, its highest since October 2008.
ECB Executive Board member Gertrude Tumpel-Gugerell and Governing Council member Yves Mersch both said yesterday that “strong vigilance” is necessary to keep a lid on inflation, a phrase the central bank uses to signal a rate increase is imminent.
This phrase "strong vigilance" was used in the 2005 to 2007 interest rate cycle one month ahead of the announcement of a hike.
“Obviously the current assessment could change depending on events going forward but for now, the signals from the ECB have been pretty clear and back up the early March ‘heads up’ for a hike on 7 April,” said Ken Wattret, chief euro-area economist at BNP Paribas SA in London.
