Coming into 2026 it was expected that the year would be one of rate stability, however geopolitical tensions feeding back into increased inflation and lower growth expectations for the Euro area is leading many analysts to predict that the ECB may increase rates this year.
Here are out thoughts on what’s happening in the market right now and how it could impact your mortgage rate –
Even if the economic disruption caused by the Iran war subsides, the impact on inflation won’t immediately dissipate leading to potential knock on effects on interest rates.
The ECB like to keep inflation at 2% and through 2022 – 2024 when inflation spiked the ECB used one of the tools in their armoury – interest rate increases – to curb inflation.
ECB rates were at a peak to mid 2024 before dropping to current position – where the main refinancing rate is 2.15% since mid 2025.
Inflation hit the ECB’s target of 2% in December 2025 and fell to 1.7% in January before increasing to 1.9% in Feb and latest Eurostat figures showing it at 2.6% end March.
With this recent growth in Euro area inflation, the ECB will no doubt be considering data closely and could potentially move on rate in their April 30th meeting or one of the later meetings this summer in June or July.
Annual inflation in Ireland now sits at 3.6% the 6th highest in the Euro area based on latest Eurostat figures.
What does rising inflation mean for mortgage holders?
If the ECB increases lending rates it impacts banks funding costs and if their funding costs increase, they may pass on rate increases to borrowers. Lenders most impacted would be non bank lenders who do not have deposit holders funds to buffer rising funding costs.
The geopolitical environment and rate increases are outside of our control, however in times of uncertainty, fixed rates offer security keeping repayments constant for a period.
What mortgage rates are most popular in Ireland?
As a Nation we tend to favour variable rates or short term fixed rates – 34% of the value of outstanding mortgages are variable rates (tracker or standard variables some of which are up to 5.15%) while 66% of mortgages are fixed, with only 9% of those fixed on fixed terms of over 5 years.
Competition remains in the Irish market, the difference between the highest and lowest new mortgage rate stands at 1.95pc, translating to €112 per month per €100,00 borrowed over a 30 year term.
This make its essential for anyone purchasing a home or rolling off a low fixed rate to do your research or seek market based advice to get the optimal rate for your circumstances.
How much do interest rates impact mortgage repayments?
According to the Central Banks latest retail interest rate report – average new lending for house rate is 3.51% which for every €100,k borrowed over a 30 year term would mean repayments of €450 per month, if rates increased by 0.5% then repayments would increase by €28 per month. Taking the average mortgage drawn for home purchase in 2025 c. €350,000 that would mean an increase of €98 per month.
So many factors influencing interest rates are outside of you control and there is no way of telling exactly what will happen interest rates even in the near term. When assessing your mortgage needs and identifying the optimal mortgage option for you it is imperative that you do your research or seek market based advice.
Contact our mortgage specialist team at doddl – Start Here!
