THE European Central Bank is set to raise it key rate tomorrow (Thursday, April 7) from 1% to 1.25%
Some 600,000 Irish homeowners will be facing increases of €15 for every €100,000 borrowed on their mortgages. The rise will be passed on to around 200,000 who have variable rate mortgages, despite a number of lenders already raising their variable rates this year.
Homeowners with trackers will also be impacted as ECB rises are automatically passed on to these mortgage holders. It will be the first time in almost two years that tracker mortgage holders will have faced a rise.
Ireland has one of the highest proportions of mortgage holders who are exposed to ECB rate rises, with 85pc on either a tracker or variable rate. This compares with 15pc of mortgages in Germany, according to the Brussels-based European Mortgage Federation.
A Bloomberg News survey predicts the ECB will lift its main rate to 1.75pc by year-end, based on the median estimate of 31 economists.

Six ways to make up for the cost of the hike
Reduce your life cover. Life cover has come down due to people living longer, so fewer payouts have to be make during the term of the cover. If you have given up smoking since taking out your mortgage protection/life cover you could save up to 30% on the premiums.

Take a bus or train to work and save on insurance. Some insurers, such as Allianz, offer discounts of up to 20% on motor insurance if you do this. You will need to provide documentary evidence of buying the likes of an annual train ticket.

Review the sum insured on home cover. The reinstatement costs of a house have dropped by 20% since the crash started. This means your home insurance costs should come down. Check out the Society of Chartered Surveyors website at www.scs.ie.

Dump payment protection policies. If you have a loan, do you really need to have it insured? This tends to be very expensive insurance, with many exclusions.

Overpay your mortgage. If you pay a lump sum or higher monthly repayments you can lower the monthly repayments, and shorten the term of the mortgage.  For example, if you have 20 years left on a €200,000 mortgage with a rate of 4%, by paying an extra €100 each month, you would save over €11,000 in interest and reduce your mortgage term by over two years.

Grab a fixed rate, if you can. AIB, Bank of Ireland, Ulster Bank, NIB, and KBC allow their customers to fix. Permanent TSB, Irish Nationwide and EBS will not.
Lowest rates for three years fixed (existing customers):

AIB - 4.88%

BoI - 4.2%

ICS - 4.5%

KBC - 4.95%

UB - 5.7%

NIB - 4.45%