Borrowers need to start planning for higher costs
Who would have thought that the world would be suspended in such surreal surroundings for a decade.
10 years, hundreds of millions of families and trillions in EU cash and finally, the world of QE is finally coming to an end (QE was introduced in 2015 following years of rate slashing by the ECB following the 2008 ‘credit crunch’).
For many, that end will mean higher borrowing costs, including monthly mortgage repayments.
For now though, the jam-jars are safe. No need to crack them open to pay higher monthly repayments but if you don’t have some extra cash put aside for the inevitable, now is the time to get cracking.
With over 300,000 mortgage holders on a variable tracker, the last few years have delivered a bonanza in low monthly repayments. For example, someone with a €300,000 tracker variable mortgage is paying €600 – €700 less per month than they were paying in 2008, this is for the same sized mortgage! The savings have been simply enormous, and this is what is about to end as Eurozone economies recover.
Most important is the ‘surprise’ at which the ECB caught the markets today when it announced that it wants to unwind its QE programme. On one hand, anybody paying attention should have known this day was always coming. However, for an institution known for acting deliberately and cautiously, the move sends an important signal; the ECB won’t be caught napping if and when inflation raises its head.
And so, for Irish mortgage holders, they won’t have to worry about run-away mortgage payment rises, just yet! But they should have a plan in place to accommodate higher monthly repayments eventually.
Frank Conway is the founder of MoneyWhizz.