The European Central Bank (ECB) has elected to raise interest rates for a third time since July, by a further 0.75 percentage points after inflation in the eurozone reached 9.9% in September.
The EU's central bank said that inflation remains far too high and warned that it expects to raise interest rates further in the near future as it seeks to return inflation to its 2% medium-term target.
The interest rate on the main refinancing operations will be increased to 2%, while the rates on the marginal lending facility and the deposit will be raised to 2.25% and 1.5%, respectively, from 2 November.
The latest announcement means base interest rates have risen from 0% to 2% since July.
In a statement, the ECB said its governing council would "base the future policy rate path on the evolving outlook for inflation and the economy, following its meeting-by-meeting approach.
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"Inflation remains far too high and will stay above the target for an extended period. In September, euro area inflation reached 9.9%. In recent months, soaring energy and food prices, supply bottlenecks and the post-pandemic recovery in demand have led to a broadening of price pressures and an increase in inflation.
"The governing council’s monetary policy is aimed at reducing support for demand and guarding."
Reacting to the announcement, Bank of Ireland confirmed that tracker mortgage rates would increase by 0.75 points on 16 November, but the lender has made no decision on interest rates for other products.
"The bank continues to keep all rates under ongoing review, and will clearly communicate any future rate change decisions at the appropriate time," the bank said.
Trevor Grant, chair of the Association of Irish Mortgage Advisors, warned that the base ECB interest is on course to hit 3% by the new year, and that the 0.75-point increase would add €37 to monthly repayments for every €100,000 borrowed.
"We have reached a point now whereby all mortgage holders need to review their options – even the 200,000+ mortgage holders who are on a tracker rate," Grant said.
"Those who are on a fixed rate might also be concerned about increasing rates – particularly those approaching the end of their fixed rate term.
"These mortgage holders could look into what their breakage fee would be on their existing mortgage contract, should they want to switch to a new mortgage agreement which would allow them to fix for a longer period of time and give them some peace of mind."
Photo: Christine Lagarde, president of the European Central Bank (ECB). (Pic: Alex Kraus/Bloomberg via Getty Images)
