A report by economists at the Central Bank has found the 20% of mortgage borrowers most exposed to interest rate increases could face higher repayments of between 41% and 50% due to interest rates hikes.
This is based on increases in rates by the ECB of between 3.5% (which is the extent of increases to date) and a maximum of 4.25%.
81% of the mortgage borrowers in this category took out their mortgages at the height of the property boom between 2004 and 2008. Their average age is 48.
The percentage of tracker mortgages in this category is 71%. Interest only mortgages account for 12% of mortgages in this group. The average outstanding balance is €224,677.
By contrast, fixed rate mortgages account for 88% of all loans in the lower 40% of borrowers. 76% of mortgages in this category were taken out from 2009 onwards. The average outstanding balance is €176,579.
The most exposed group paid €200-€300 less in repayments up to June of last year, after which the ECB began to increase rates. Repayments by the end of this year, it's estimated, will be "almost equal" across all borrowing groups.
In simple terms, borrowers on products like trackers would have been paying little or no interest up to the middle of last year, but will have caught up with the repayments borrowers have been paying on fixed rates taken out in recent years.
When the mortgage market is taken in its entirety, the report estimates the average mortgage repayment will be between 13% and 16% higher, as those coming off fixed rates in the short to medium term will likely now face higher rates.
The report says 30% of borrowers will be insulated from higher rates until the end of 2024 and around 20% will be shielded until the end of 2025, based on their existing fixed rate agreements.
At the end of December 2022, there were 712,145 mortgage accounts in Irish registered banks, retail credit firms and credit servicing firms. Banks held 84% while the ‘non-banks’ held 16%.
Approximately 18% of accounts were on variable rates while 22% were on trackers. 41% were on fixed rates of over two years duration while 19% were on fixed rates of up to two years duration.
