'Ban variable mortgages here'
ALL new home buyers should be forced to take out long-term fixed mortgage rates, according to a leading economist.
The purchasers should be banned from availing of variable rates, economist Ronan Lyons believes. This would help homeowners manage their household budgets as they would not be affected by European Central Bank rate hikes.
Mr Lyons, of the property website Daft.ie, said Ireland's membership of the eurozone left the country with very few ways of preventing future housing bubbles.
The reason is that the interest rates set by the ECB are appropriate to larger countries like Germany and France and not Ireland.
Mr Lyons pointed out that repayments were too low for Ireland when the property bubble was inflating. Now, rates are rising at a time when householders are struggling to pay their mortgages.
Some eight out of 10 mortgages in Ireland are either tracker or standard variable rate. In Germany, most homebuyers have 20-year fixed rate mortgages.
"We should ban variable rate mortgages. Many countries in the world have mortgages where the interest rate is fixed for the lifetime of the mortgage," he wrote.
In the US, adjustable rate mortgages are viewed in the same light as subprime mortgages, he added.
Homebuyers in Ireland have been hit with interest rate rises from their lenders as well as ECB hikes. Last week, Ulster Bank said its variable rate would rise by 0.6pc in July.