Irish Independent, Charlie Weston. Contribution from Frances O’Hanlon

THOUSANDS of homeowners are desperately trying to lock in to fixed-rate mortgages as home-loan rates have started to surge in the past few months.

So far Permanent TSB, AIB, Bank of Ireland/ICS, EBS/Haven and KBC Homeloans have increased their standard variable for new and existing customers, with most of these lenders also hiking fixed rates.

Financial regulator Matthew Elderfield warned last week that more crippling mortgage rate rises are on the way for hard-pressed mortgage holders.

The regulator told an Oireachtas committee higher mortgage rates were an “unfortunate but inevitable consequence” of the banking crisis.

But is it always a good idea to fix? And some homeowners are finding that it is not even possible to fix.

A survey by the Irish Mortgage Corporation found that almost a third of adults are struggling to pay bills.

And the survey found that nearly a half of homeowners fear they will struggle to pay their mortgage this year if rates rise as expected.

Monthly repayments rising by more than €250 would pose a problem for mortgage holders, the survey found.

But some of those seeking to lock in to fixed rates are finding they are being blocked from fixing, being offered very uncompetitive rates, or kept in the dark by their lender on what fixed rates are available for existing customers.

Panicking

Mortgage adviser Frances O’Hanlon of FOH Mortgages & Investments in Clonmel, Co Tipperary, said homeowners were panicking about rate rises and were rushing to sign up for fixed rates.

But she warned that it did not always make sense to fix, especially if your lender only offering a very high fixed rate.

The virtual closure of the switcher market meant that homeowners were at the mercy of the mortgage lenders and are forced to accept whatever fixed rate their bank offers, especially if they are in negative equity.

“People should tread carefully, By panicking now people could end up entering in to something that will cost them dearly in the long run,” Ms O’Hanlon said.

This was especially the case with the fixed rates on offer from Permanent TSB and Bank of Scotland (Ireland) for existing customers, Ms O’Hanlon said.

“People need to ask themselves: what are you buying into and what will it cost you? You could end up paying an extra 3pc, so you need to clear about what it is costing you.”

She advised people to grab a fixed rate if it is in or around 4pc, but rates of more than 4.5pc or 5pc were hardly worth considering.

One lender that is making it difficult for those who want to fix is building society EBS. It has been accused of treating members unfairly after it emerged that it won’t publish a list of fixed rates for existing customers.

The society admitted that each application from existing customers who want to lock in to a fixed rate was assessed on a case-by-case basis.

Michael Dowling of the Independent Mortgage Advisers Federation said he dealt with an EBS customer recently who was offered a rate of 4.75pc to fix for three years, but when Mr Dowling rang the society on the client’s behalf he was offered 4.25pc.

National Irish Bank has defended its policy of refusing to allow its customers who are in negative equity to qualify for a fixed rate. This is because the bank only offers fixed rates for those whose loan represents 80pc or less than the value of the home.

A spokesman for the bank admitted that those customers on a standard variable rate, who are in negative equity, would not be able to fix their mortgage.

Homeowners who want to fix are also finding that they are being offered much higher rates than brand new customers of the lender, in an apparent snub to customer loyalty.

Among the lenders punishing existing customers with higher rates than new customers are Permanent TSB, EBS/Haven, KBC Homeloans and Bank of Ireland.

• For tips on whether or not you should fix see the National Consumer Agency’s financial website, www.itsyourmoney.ie, and search for the word “fix”.

Sunday Business Post Article by Emma Kennedy – Contribution from Frances O’Hanlon

A survey published last week found that half of all mortgage customers would struggle to meet their monthly repayments if they increased by more than €250.

According to the figures from CredyCare, a debt management company, an increase of €250 equates to roughly a 1.5 per cent rate hike on a typical €300,000 mortgage.

The study found that 49 per cent of mortgage customers currently paid less than 3 per cent interest, but this looks set to change in the months ahead.

Last Friday, Bank of Ireland raised interest rates, following an announcement a week earlier. As a result of the 0.5 per cent increase in the bank’s standard variable rate, monthly repayments on a €300,000 mortgage will increase by about €80 to €90 for existing customers.

On the same day Bank of Ireland announced its higher rates, EBS announced that its standard variable rate would increase by 0.6 per cent to 3.3 per cent from May 1. AIB raised its variable mortgage interest rate by 0.5 per cent last month, following a similar move by Permanent TSB in February. And, last week ,KBC Bank hiked its standard variable rate from 3.28 to 3.71 per cent.

Banks cite the cost of funding as a major problem, and say that current mortgage pricing is unsustainable – so consumers take the hit.

Matthew Elderfield, the Financial Regulator, in a statement to the Joint Oireachtas Committee on Economic Regulatory Affairs last week, said interest rate increases for borrowers were an ‘‘unfortunate but inevitable consequence’’ of the banking crisis.

‘‘It is important to be frank and to acknowledge that the coming months are likely to see a continuation of the process of the banks repricing their mortgage books,” Elderfield said.

‘‘Ireland had very low mortgage rates in the recent past, but that era is now clearly ending. Part of the reason for such favourable rates was that the banks’ business models were, as we now know, fundamentally flawed.”

In Elderfield’s view, this restructuring of business models coupled with higher funding costs means borrowers will feel the pinch in the months ahead.

However, consumer representatives were unhappy with the regulator’s comments.

‘‘The more people suggest that something is inevitable, the more of a reality it becomes,” said Dermott Jewell, chief executive of the Consumers’ Association of Ireland.

He said that some banks might use the regulator’s comments as justification for increasing rates. Jewell also said this would be very hard for consumers to stomach, especially given the role taxpayers have played in bailing out the banks. But one senior banking source said that blaming the banks was pointless.

‘‘We can argue the toss about how we got here, but it is about where we are and where we must go now,” he said.

And where we are going is up. ‘‘Unfortunately, I do believe that the current round of interest rate hikes is only the first of several,” said financial adviser Liam Ferguson.

‘‘Banks are seeking to rebuild their balance sheets any way they can, and this is one way.”

Tipperary-based financial adviser Frances O’Hanlon, who runs a mortgage and investment company, said interest rates would definitely increase over the next few months.

However, she advised mortgage customers and potential buyers to think carefully and not make hasty decisions.

‘‘The bottom line is, as it has always been, make sure you do what suits you and your financial plans, and don’t panic,” O’Hanlon said.

First-time buyers

For many first-time buyers, interest rate hikes are not the sole concern. Obtaining a mortgage can be difficult in light of reduced incomes and shaky job prospects, coupled with uncertainty about the housing market and shifting interest rates.

Attractive rates around the 2.5 per cent mark have all but disappeared for first-time buyers, with rates of 3 per cent and up more common now.

After the recent round of rate hikes, Bank of Ireland’s lowest rate for first-time buyers is its 3.1 per cent one-year fixed rate, available for up to 92 per cent finance.

AIB increased its loan-to-value variable rates by 0.34 per cent in February.

Now, the bank’s best variable rate for first-time buyers is its 3.03 per cent loan-to-value variable rate. AIB also has a one-year fixed rate of 2.82 per cent for first-time buyers, while Irish Nationwide offers a two-year fixed rate of 2.77 per cent.

Trading up

Bank of Ireland’s two-year fixed rate for homeowners planning to trade up stood at 2.7 per cent when it was introduced last winter. This rate has now jumped to 3.2 per cent, but still represents the lowest fixed rate on offer from Bank of Ireland for those moving home. However, those trading up can also opt for variable rates ranging from 2.8 to 3.1 per cent.

National Irish Bank offers the same rates to all new customers, regardless of whether they are new to the property market or not. At present, their loan-to-value dependent variable rates start at 3.2 per cent.

Similarly, Permanent TSB offers some rates to all new customers. A new one-year variable rate of 4.1 per cent is available from tomorrow.

First-time buyers can borrow up to 90 per cent of the purchase price of their home at this rate, but those trading up can borrow only 85 per cent of the property’s value.

Existing customers

Mortgage rates are typically in sharpest focus for those buying their first home or climbing the property ladder, but homeowners who plan to stay where they are are also becoming more savvy when it comes to getting the best deal on interest rates.

Ferguson said that some borrowers on standard variable rates had a limited range of options.

‘‘Switching between lenders is possible only for those with loans that represent a small part of the home’s current value,” he said.

‘‘Those with high loans-to-value due to property value falls or those in negative equity have no option to switch lenders.

‘‘So each lender has a certain captive group of customers who have little choice but to accept any increases.”

Couple this with the threat of European Central Bank hikes and Ferguson said it was worth considering fixing, even though most fixed rates have also increased recently.

O’Hanlon said fixing was an attractive option for variable rate customers, apart from those who had managed to hold onto a tracker rate mortgage.

‘‘We are still in an environment of artificially low interest rates, and some of the fixed rates on offer are excellent,” she said.

Existing Bank of Ireland customers who want to fix can choose from two-,threeor five-year terms, with interest rates of 3.3, 3.5 and 4 per cent respectively.

According to a spokeswoman for the bank, about 15per cent of its existing mortgage book is on a fixed rate, but there has been significant interest from other customers in recent months.

National Irish Bank has a range of fixed rates for existing customers, ranging from4.21 to 4.81 per cent.

AIB’s existing customers have access to the same 2.82 per cent one year fixed rate as new customers.

Existing AIB customers can also opt for a two-, threeor five-year fixed rate with interest rates of 2.89, 3.06 and 3.51pe r cent respectively.

Permanent TSB’s existing business rates range from 5.25 per cent for a two-year fixed rate to 6.1 per cent for a ten-year fixed rate.

Rachel Doyle, director of mortgage services at broker group PIBA, said that, given recent rate hikes for new and existing customers, consumers should be in no doubt as to what the future holds.

‘‘Variable and long-term fixed rates are both on the rise, so delaying a decision may be costly,” she said.

However, Doyle advised people generally not to fix for less than five years.

‘‘Fixing at a good rate for longer terms gives security and enables better planning,” she said. ‘‘Shorterterm fixing could leave you exposed to a large jump in repayments within a relatively short period of years.”

All interest rates quoted are annual percentage rates (APR)

For online article visit http://www.thepost.ie/story/text/eyidgbkfsn/