Why 200,000 mortgage holders are 'at-risk' of paying increased rates

'We could see variable rates rise to around 5.5% - that would add about €111 a month to the average mortgage repayment'
Jack Quann
Jack Quann

14.09 1 Jun 2023

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Why 200,000 mortgage holders a...

Why 200,000 mortgage holders are 'at-risk' of paying increased rates

Jack Quann
Jack Quann

14.09 1 Jun 2023

Share this article

Around 200,000 mortgage holders could soon have to pay higher rates, as banks seek to preserve their profit margins.

That's according to Mark Coan, founder online finance guide Moneysherpa.

He told The Pat Kenny Show those on variable rates or fixed rates of less than two years could be hit next.


"They're potentially going to fall into the pot," he said.

"It is a forecast - but based on some sensible assumptions about how much the banks are going to have to increase their interest rates by, we could probably see variable rates rise to around 5.5%.

"Currently they're around 3.5% - so that would add about €111 a month to the average mortgage repayment.

"That's quite a big hit... if rates stay at 5.5%, that would be €17,000 over the average mortgage term.

"So it's a big, big increase in the cost of the average mortgage".

'International pressure'

Mr Coan said this change is because Irish banks have come under pressure to increase the rates they offer to savers.

"Irish banks are coming under pressure to increase the 0% overnight rates they're offering to savers," he said.

"The pressure's coming from international players, it's coming from outside Ireland.

"The German fintech, Trade Republic, and Dutch bank Bunq [are] offering overnight rates already in the Irish market of 1.5% to 2%.

"What the Irish banks are really worried about is if Revolut do the same for their two million customers".

'Status quo is not an option'

Mr Coan said said banks want to keep as much money as they can on deposit.

"There's €150bn currently on deposit with the Irish banks; that would be under threat, and they really need to head that off in the coming months by increasing the rates from 0% to around a reasonable return of 2%," he said.

"The good news for savers is likely to mean bad news for borrowers.

"Banks will look to preserve their margin between what they're offering to savers, and what they're charging to lenders".

A man counting money. Picture by: ronstik / Alamy Stock Photo

Mr Coan said the banks have to keep up with other offerings.

"We're still a nation of savers," he said.

"We've got €150bn on deposit, whilst... the banks are only lending around €100bn.

"So actually it suits the banks to keep deposit rates low than not pass through higher rates to variable customers.

"Ideally, if there weren't these international players in the market, the banks would make more by just keeping the status quo - but that's probably not an option.

"If Revolut, for example, entered the market and offered 1% or 2% on their overnight rate, then that €150bn is at-risk," he added.

Listen back here:

Main image: Split-screen image shows file photos of a woman working on a calculator and a letter from a bank

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Banks Bunq Deposit Fintech Fixed Rates Mark Coan Moneysherpa Mortgage-holders Mortgage Rates Rates Revolut The Pat Kenny Show Trade Republic Variable Rates

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