The European Central Bank has decided not to increase interest rates for the coming year.

ECB decision good news for mortgage holders

The European Central Bank’s (ECB) recent decision to not to increase interest rates will be a relief to many mortgage holders in Ireland.

That’s according to Trevor Grant, Chairperson of the Association of Irish Mortgage Advisers (AIMA), who says last week’s decision by the ECB will be particularly good news for those on tracker rates. However, Mr Grant warned that the ECB’s decision shouldn’t be taken as a sign that rates are on the way down any time soon.

“Whilst it is generally expected that rates will start to fall in 2024, opinion is very much split on when this might start to happen,” said Mr Grant.

He added: “And furthermore, any decreases are likely to be slow with the base ECB rate only falling to an expected low of between 2.5% and 3%.”

According to AIMA, even if the ECB starts to reduce its rates at some point next year, home-loan mortgage rates are “highly unlikely to fall”. This is because home loan rates have not increased at the same levels as the ECB rate has, while banks are under pressure to increase returns for savers.

At 4.5%, the ECB rate is still at a record high and the ten ECB rate increases which have been introduced since July 2022 have added significantly to the financial stress which many homeowners are now under. On this basis, AIMA says mortgage holders shouldn’t delay switching or looking for a better deal on their mortgage.

Mr Grant continued: “While the mortgage deals available from lenders aren’t as good as they were before interest rates started to rise, there are still options and very good value out there which can help borrowers bring down the cost of their mortgage bills.”

These options include LTV mortgages said Mr Grant, where mortgage holders may be eligible for a cheaper mortgage if the value of their home has increased since they first took out their loan.

“A market-based mortgage broker will know the best deals out there for you so it would be worth getting the advice of a broker if you’re feeling the pressure of higher mortgage bills,” said Mr Grant.

“Be aware that your lender will only advise you on the products they have to offer and not what is available in the market,” he concluded.

According to the ECB, inflation is still expected to stay “too high for too long”, and domestic price pressures remain strong.

An ECB statement read: “The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner.

“Based on its current assessment, the Governing Council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal. The Governing Council’s future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary.”