Borrowers have been warned that European interest rates are set to rise, but the increases will be gradual and it will be 2021 before they hit 1pc.
This is good news for those on trackers, and people borrowing to buy homes now.
European Central Bank rates are zero at the moment, but the ECB has been signalling that the days of super-low interest rates are coming to an end.
More than 300,000 borrowers with tracker mortgages benefit from the record low ECB rate as their mortgage rate can rise only when the ECB rate goes up.
Most trackers are pegged at around 1pc to 1.2pc above the ECB rate.
If ECB rates rise to 1pc, it would mean a typical tracker customer could see monthly repayments rise by €50 for every €100,000 borrowed over 30 years.
International ratings agency Moody’s said it expected European rates to increase gradually over the next few years, but it could be next year before rates began to rise.
Moody’s said in a report for investors: “While we believe the increases will be very gradual, the perception among consumers of the future direction of interest rates could in itself affect consumer confidence and spending.
“Higher borrowing costs are negative from a borrower’s perspective, but they must also be put into the context of a background of stronger economic growth and lower unemployment.”
ECB interest rates have remained at zero for longer than had been expected.
But since the start of this year, ECB president Mario Draghi has eased off on pumping money into the eurozone economy through purchasing bonds.
The ECB is also expected by the markets to soon indicate a date for this stimulus programme to come to an end.
This looks likely to clear the way for the ECB to increase its key short-term interest rates some time next year, analysts said.
Moody’s said low interest rates had persisted for a number of years in Europe and had been favourable for borrowers.
“We expect that the ECB will reduce monetary easing in the euro area very gradually over the next few years,” it said.
Rising ECB rates are likely to cause variable and fixed rates to rise. These rates in this country are a multiple of those in the rest of the eurozone.
The gradual rise in interest rates comes as there are fears that mortgage cashback offers could be banned in a move that would hit first-time buyers and switchers hard.
Banks have been accused of using cashback incentives to camouflage their exorbitant mortgage rates.
A Fianna Fáil bill that would ban the practice of banks offering cash incentives to first-time buyers and movers could be law by the summer.
Meanwhile, prices rose last month due to electricity suppliers and restaurants increasing their charges.
Average prices were 0.4pc higher in December compared with the same month in the previous year. This was despite a slight fall in prices in the month of December, according to the Central Statistics Office.
Prices fell during the month, driven by heavy discounting by retailers in the run-up to the Christmas period.
The annual rate of inflation rose due to higher housing and home energy prices.
Mark Whelan, of price comparison site Bonkers.ie, said six out of Ireland’s 10 energy suppliers increased prices in the last three months of 2017, adding between €20 and €40 to average annual bills.
The Public Sector Obligation (PSO) levy increased by 30pc in October too, adding an additional €25 to annual bills.
The hikes are set to continue in 2018 with the State’s largest electricity retailer, Electric Ireland, due to increase prices by 4pc on February 1.
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