TRACKER MORTGAGE RATES are set to rise for the third time this year as the European Central Bank (ECB) announced a 0.75 percentage point interest rate hike.
Policymakers opted to raise the ECB’s rates by 75 basis points, just over a month on from the previous hike in early September.
The move is part of the ECB’s latest efforts to tame inflation, which has been driven in recent months by the surging price of food and energy in the wake of Russia’s war in Ukraine.
The ECB added that it would likely raise interest rates further in the future as part of plans to reduce overall inflation.
“The Governing Council took today’s decision, and expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target,” said a spokesperson for the ECB.
With the latest increase, mortgage repayments for customers on tracker mortgages will increase, while it is not clear if banks will increase variable rate mortgages.
“The Governing Council’s monetary policy is aimed at reducing support for demand and guarding against the risk of a persistent upward shift in inflation expectations.”
The ECB added that it “stands ready” to adjust any instrument available to it to ensure that inflation stabilises at 2%.
ECB president Christine Lagarde had warned recently that inflation was “far too high” and more action was required to prevent price shocks from becoming “entrenched”.
During a press conference this afternoon, she defended the rate hikes saying that it was the “most appropriate” way to tackle inflation.
“The decision that we made today is the most appropriate in order to restore price stability, which, as you know well, is critically important for not just the stability of prices but also for the economy to actually prosper and recover,” she said.
On the potential to raise rates further in the future, Lagarde said that “there is still ground to cover”.
Additional reporting by AFP
