Mortgage holders on low incomes and those on trackers hit hardest by ECB hikes

Those on lower incomes are thought to be mainly the around 80,000 “mortgage prisoners” trapped with vulture funds who have been hit hard by rate rises, but are unable to take out a fixed rate.

There has doubling of those on a tracker rate who are paying 20pc or more of those gross income to meet higher repayments.

The ECB has hiked its key lending rates 10 times in the last year and a half.

Tracker rates rise in lock-step with ECB rate rises.

A new release from the Central Statistics Office shows households with the lowest gross income are coming under financial pressure from the succession of rate rises.

The 20pc of households with the lowest gross income saw the largest growth in the median debt service to income ratio.

It rose from 32pc of their household income in the first half of of 2022 to 41pc in first half of this year, according to the ‘Household Mortgage Affordability Analysis 2023’ from the CSO.

Debt-to-income ratio is all monthly debt payments divided by gross monthly income.

The proportion of households with tracker rate mortgages who paid 20pc or more of their gross household income to service their household mortgage debt almost doubled from 7pc of households in the first half of 2022 to 13.3pc in the same period this year.

Up to 2022 households with tracker rate mortgages had the lowest median debt service to income ratio of any mortgage type.

This was they benefited from a long period of ECB rates being at 0pc.

But by the first half of this year households with fixed-rate mortgages had a lower median debt service to income ratio.

Around four in 10 mortgages are on a fixed rate. This means they have not being impacted by the record rate rising by the ECB, but face much higher repayments when their fixed term ends.

CSO statistician Brian Cahill said: “Our research found that households with tracker rate mortgages and the 20pc of households with the lowest gross household income were most significantly impacted by interest rate changes in the second half of 2022 and the first half of 2023.”

He said identifying the median debt service to income ratio involves ranking each household with a mortgage on the household’s main residence from lowest to highest based on the proportion of their gross household income required to service their monthly mortgage payment.

The CSO then selects the households with the mid-point or median value.

Last month PTSB become the second lender to cut a mortgage rate since the European Central Bank engaged in a succession of interest rates hikes.

The lender, which changed its name from Permanent TSB to PTSB, is reducing the rate for new business by 0.4 percentage points on its four-year fixed term mortgages.

The ECB has hiked its main lending rate 10 times in the last 15 months to take it to 4.5pc.

The Governing Council of the Frankfurt-based central bank meets this week, but it is not expected to hike rates.

This is despite Eurozone inflation dropped to a two-year low of 2.4pc last month, just shy of the bloc’s 2pc target.

Markets are currently pricing in rate cuts of up to 1.5pc, starting in spring next year, said Diarmaid Sheridan, a research analyst at Davy stockbrokers, but they could be running ahead of where the central bankers’ heads are at.