MORTGAGE RATES RISING

Standard variable rates could hit 5% by the end of the year even if the European Central Bank continued to hold its base rate steady at 1%, a leading Dublin mortgage broker told The Sunday Business Post.

Michael Dowling said the 300,000 or so mortgage holders on variable rates were vulnerable as banks looked to rebuild their balance sheets. Permanent TSB is now charging a variable rate of 4.7% and it is believed other banks will follow shortly.

An increase in the average standard variable rate mortgage to 5% would mean repayments on a €200,000 mortgage would rise to €1,075 a month, compared with €955 a month at a 4% rate.

“It is the tipping point for a lot of people,” Dowling warned.

He also said there was growing evidence that gardai in particular were under “phenomenal pressure” because of the large debts they had incurred for property investments.

Meanwhile, the same newspaper reports that house prices are likely to fall for at least another two years.

“It will be 2013 before the housing sector in Ireland will really begin to see meaningful signs of recovery,” said Bill O’Neill, chief investment officer at Merrill Lynch’s wealth management unit in Europe, Middle East and Africa. “The housing sector will be constrained for an extended period of time, there’s no doubt about that.”

O’Neill goes on to warn that people will “be dealing with the longest downturn in living memory” for several more years.