ECB hikes rates by half a point, pledging the same in March
The European Central Bank has raised its main borrowing rate by half a point to 3pc, promising the same next month.
It also raised its deposit rate by half a point to 2.5pc, while its overnight rate - the rate at which banks borrow short-term - went up to 3.25pc.
It is the ECB’s fifth rate hike since July.
“The Governing Council will stay the course in raising interest rates significantly at a steady pace and in keeping them at levels that are sufficiently restrictive to ensure a timely return of inflation to its 2pc medium-term target,” the bank’s 26-member governing council said in a statement after a meeting in Frankfurt on Thursday.
“In view of the underlying inflation pressures, the governing council intends to raise interest rates by another 50 basis points at its next monetary policy meeting in March and it will then evaluate the subsequent path of its monetary policy.”
The rate rise was widely anticipated, as central bankers try to tame eurozone prices.
Further rate rises are in store, despite the fact that eurozone inflation eased to 8.5pc in January (and to 7.7pc in Ireland), from above 9pc in December.
Today's move will add an estimated €50 for every €100,000 borrowed by Ireland's tracker mortgage customers, said Trevor Grant, chairperson of the Association of Irish Mortgage Advisors.
“For the 200,000 or so tracker mortgage customers who have yet to do so, it is definitely worth considering fixing your mortgage rate before it’s too late,” he said.
“This advice also goes for those on variable rates or with fixed rates due to mature in the next 12 months or so.”
Around 200,000 Irish borrowers on variable rates have also been warned by experts that they are likely to face increased repayments over the coming weeks.
The country’s three main lenders have each pushed up fixed rates by one percentage point in the last few months, but have not hiked their variable rates in response to the ECB.
Vulture funds are charging their customers around 6.5pc, with some charging 7pc, while most do not offer fixed rates. Some 113,000 mortgages are owned by unregulated vulture funds.
When all increases since July are taken into account, the total increase works out at more than €200 a month, according to calculations by Daragh Cassidy of price comparison site Bonkers.ie.
The decision came the same as the Bank of England hiked rates by half a point to 4pc, its tenth hike in a row, with governor Andrew Bailey saying it was “too soon to declare victory” over high inflation.
Yesterday, the US Federal Reserve raised its main lending rate by a quarter point, with chair Jerome Powell saying that a “disinflationary process” was underway and that he could see a “path” to bringing inflation back to target.