€3,000 a year extra for rst-time mortgages

Up to €3,000 a year has been added to the cost of paying for a mortgage for a typical rst-time buyer couple, because of rising interest rates.

e cost of paying a mortgage for a new buyer couple is now heading for €3,000 more annually than this time last year.

And there are warnings that more mortgage rate hikes are on the way, something that will make it even harder for new buyers to purchase their own homes.

An analysis of the market shows that property prices will have to fall sharply if thousands of people are to avoid being priced out of the market.

is time last year, a rst- time buyer couple was able to get a xed-rate mortgage at 2%.

Borrowing €300,000 over 30 years meant a couple had monthly repayments of €1,109, according to calculations by Bonkers.ie. is works out at €13,308 a year. is means repayments on the same-sized mortgage have risen to close to €1,340 a month. e higher cost of borrowing comes after Permanent TSB, Bank of Ireland, AIB, Avant Money, Finance Ireland and ICS Mortgages increased their xed rates, with AIB also raising its variable rates.

But following ve increases in European Central Bank (ECB) rates, the typical xed rate in the market now stands at 3.5%.

Over a year this means additional repayments of around €2,770.

Fixed rates are expected to rise again, with the ECB warning it will impose another increase to its rates next month, and another in the summer.

Daragh Cassidy of Bonkers. ie said the impact of rising rates on mortgage repayments will be immense, with repayments potentially rising by over 60pc for rsttime buyers unless property prices fall dramatically.

“ e lowest mortgage rate on o er in Ireland is currently 2.75%, up from just 1.90pc less than a year ago.

“However, by the end of the year the lowest mortgage rate on o er in the entire market is likely to be over 5%, with the average rate around 6%.”

Mr Cassidy said that, if rates rise to these levels, property prices would need to fall anywhere from around 30% to 40% to keep mortgage repayments at similar levels to last year.

Bonkers.ie forecasts that this a ordability squeeze will outweigh other factors and lead to a fall in property prices.

Mr Cassidy said the impact of rising interest rates seems to have been forgotten about when it comes to forecasts for property price growth.

“Given the huge increase in interest rates since last July, with another 0.50-percentage-point increase almost guaranteed in March and a further 0.25-percentagepoint increase likely by the end of this summer, it’s hard to see how this won’t hugely a ect property price growth.

“Some of the forecasts for growth this year seem wildly optimistic. Indeed, it’s hard to see how an outright fall in prices this year and next can be avoided.”