LAST UPDATE | 25 Jan

THE EUROPEAN CENTRAL BANK has decided not to change interest rates.

The ECB launched an unprecedented rate hiking cycle in 2022 after Russia’s war on Ukraine caused another spike in inflation in the wake of the pandemic.

Inflation is now slowing steadily, and the ECB has left rates unchanged after their third consecutive meeting today, meaning the benchmark deposit rate stays at the current record-breaking level of 4%. 

The governing council of the bank reiterated that it considers rates are at levels that will contribute to returning inflation to the 2% mark.

President Christine Lagarde has pushed back against the markets already, last week she said that it is “too soon to shout victory” in relation to inflation. 

She told Bloomberg television that the first rate cut would “likely” only come this summer and only if the latest data supported such a move, citing economic uncertainties and concern about rising wages.

The US Federal Reserve is facing a similar situation, where Fed officials have been pushing back on market expectations of rate cuts. 

After months of decline, eurozone inflation accelerated to 2.9% in December.

The increase was mainly due to the comparison effect with a year earlier, when governments provided exceptional support to help households with energy bills. 

Mortgage rates in Ireland

Mortgage brokers in Ireland have warned that homeowners should consider switching providers in advance of the end of their fixed-term loans, as more rate rises may be in sight.

Despite it being predicted that the ECB would stay put on rate rises for now, brokers said that the full impacts of recent rate rises have not yet been fed through to consumers. 

Mark Coan, the founder of Money Sherpa, told The Journal that his working assumption is that rates will stay high for quite a while, and that some buyers should see it as a bonus if they do come down. 

Coan explained that lenders have not yet passed the full extent of ECB rate rises through to borrowers and because of this he expects both variable rates and fixed rates to increase within the year.

Coan’s view is that we could see the average variable rate jump from approximately 4% currently to as high as 6%, while the average fixed rate could jump from 4% to 5%.

Other mortgage brokers shared this view. Read more about mortgage advice from experts here.