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Irish Mirror
Irish Mirror
National
Louise Burne

Leo Varadkar claims ECB mortgage rate hike for thousands could help bring down house prices for others

Increased mortgage interest rates could help “contain” or bring down house prices in Ireland, Tánaiste Leo Varadkar has suggested.

He made the comments just hours before the European Central Bank (ECB) is expected to raise rates by 0.75%. The hikes are being introduced in a bid to curb inflation, which is currently running at 8.2% in Ireland.

The move could affect thousands of Irish mortgage holders and add several hundred euro each month to repayments.

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Tracker customers are set to be worst affected by the move, with possible increases of €1,620 a year. This will be the third rate to mortgage interest rates in recent months.

Speaking on Thursday morning, Mr Varadkar said that while the interest rate increases would not be welcome news for mortgage holders, it could lead to lower house prices for people trying to get on the property ladder.

“The European Central Bank is independent [and] is in charge of managing the stability of the Euro system and bringing inflation down,” the Tánaiste explained.

“Obviously, it's not going to be welcome for people borrowing and mortgage holders.

“But it will have other effects. It will help to bring down inflation, for example. For pensioners, it will mean a better return on their savings.

“I do think we need to bear in mind that aspects of interest rate policy will probably also help to contain house prices and maybe even bring them down for people that are buying for the first time.

“We have a very prolonged period of very low-interest rates. That wasn’t normal and that has now come to an end.”

Public Expenditure Minister Michael McGrath was more cautious in his comments, however, and would not confirm if he also believed the interest rates would lead to house prices falling.

He said that he did not have a “crystal ball”.

Minister McGrath said that while there “will be pain” for many people and businesses, inflation needs to be contained.

“I'm not going to speculate on what direction house prices will go,” he said.

“It's such an important issue for so many people who are looking to buy and considering selling.”

The Public Expenditure Minister also noted that recent changes to the Central Bank’s mortgage lending rules and other variables could also affect house prices.

It was recently confirmed that first time buyers will be allowed to borrow four times their income. Second times buyers will be able to borrow 90% of the total cost of a property.

Minister McGrath said: “There are a whole set of variables that work into how much somebody can borrow and what the price of a home is going to be.

“I’m not going to make any predictions in that regard.”

He also rejected suggestions that the interest rate rises would “wipe out” any benefits that people would have seen following last month’s Budget.

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