The base deposit rate now sits at a historic high after bosses hiked the rate – for a ninth consecutive time – from 3.5 per cent to 3.75 per cent.
Interest rates are now the highest they have been since May 2001.
Today’s decision will see the rate that banks pay to borrow at the ECB’s weekly auctions increased to 4.25 per cent from 4 per cent.
And daily loans will now cost consumers 4.5 per cent, which is up from 4.25 per cent.
In a statement today, the ECB said: “The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels.”
Those with tracker mortgages are expected to see their mortgage repayments push up by around €25 per month or more.
However, the impact will depend on the mortgage interest rate and the size and term left on the mortgage.
Trevor Grant, chairperson of the Association of Irish Mortgage Advisors said today’s increase will “add significantly” to the financial stress currently faced by Irish homeowners.
And he warned that those with tracker mortgages have taken the “brunt of the increases” in ECB rates since last July.
He said: Those with a tracker mortgage are now typically paying interest rates of between 5 per cent and 5.75 per cent as a result today’s 0.25 percentage point increase.
“Tracker mortgage rates today therefore dwarf those that were in place before ECB rates start to rise.
“Tracker mortgage holders who have not already done so should make it their priority to look at switching into a fixed rate product as staying on their tracker rate in the current interest rate cycle could ultimately prove far more expensive.”
However, Mr Grant warned that thousands of others are “increasingly being drawn into the firing line”.
He explained: “Over 60,000 homeowners will come off their low-cost fixed rates this year, while another 70,000 will do so next year.
“The mortgage bills of these 130,000 homeowners will shoot up unless they act now to shield themselves from the mortgage shock just around the corner.
SOME HOUSEHOLDS ‘SIMPLY UNABLE’
“Those due to roll off fixed rates soon may be able to lock into a new fixed rate early even if their fixed rate hasn’t come to an end.
“Any opportunity to lock into a good mortgage deal now should be taken up. A mortgage broker will know the best deals out there for homeowners.”
Joey Sheahan, Head of Credit at online brokers MyMortgages.ie, urged mortgage holders to look at switching their options, but explained that he doesn’t think the rise will deter others from entering the market.
He said: “I don’t believe today’s rate increase will deter anyone who is ready to purchase a home as it’s generally cheaper to repay a mortgage as opposed to renting the same property.
“Ironically, as of today, we can arrange a 30-year fixed rate of 4.1% with no risk.
“We are inundated with enquiries from people who are looking for certainty.
“At that 4.1 per cent rate, borrowing €400,000 fixed for 30 years costs €1,932 monthly.