Dramatic rise in Finance Ireland rates

05 October 2022
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Finance Ireland, one of Ireland's newest mortgage lenders, has dramatically increased their mortgage rates. This is in direct response to the cost they are currently paying for funds on the money markets. Finance Ireland Ltd is not a bank and accordingly does not have access to direct deposits as a source of funding.

Other lenders will increase their rates in due course. We would not anticipate the main banks increasing their rates at this level at present - but their rates could increase to these levels over the coming years.

The current rising interest rate environment has its foundations in a number of areas:

  • The long held assumption in the ECB that a base rate in the region of 2% is needed to control medium term inflation coupled with the decision to cease its quantitative easing programme.
  • The need to tackle the inflationary effect of the post pandemic spending spree that has, until recently, driven consumer demand.
  • The supply difficulties caused by the war in Ukraine which have resulted in dramatic price increases of a whole range of materials including fuel, food stuffs. engineering goods, building materials etc.

If peace arrives, there will be a peace dividend but this too will be inflationary and hence the need to maintain tight control on interest rates.

It is expected that European base rates could rise to 2.75% by end of next year.

There is a danger than the new higher interest rate era will help push economies into recession, dampening demand and impacting investment decisions.

Here in Ireland there is nothing we can do to control European base rates.

Bank customers may well be willing to continue to receive low deposit rates due to the lack of other investment options available and this would help if in turn mortgage rates were not allowed to rise too quickly.