The European Central Bank is next meeting on 11th June and a rate rise is widely expected. If you have a mortgage, savings or borrowings of any kind, here is what you need to know. (We have also written more in-depth article for those with mortgages here).
Why is the ECB likely to increase rates again?
Inflation is rising again across Europe. April’s figures came in above 3%, driven largely by higher oil and gas prices linked to the ongoing conflict in the Middle East. When inflation rises, the ECB’s job is to bring it back under control, and its primary tool for doing so is raising interest rates.
This is not identical to what happened in 2022, when the ECB raised rates by 450 basis points in response to the Russian invasion of Ukraine and the wave of government spending that followed Covid. That cycle was driven by a combination of an energy shock and an enormous amount of money that had entered the economy during the pandemic. This time, the picture is less extreme. The labour market is softer, wages are growing more slowly, and most analysts expect the current cycle to be shallower and shorter.
That said, analysts at RSM expect a 25 basis point increase at the June meeting, with financial markets pricing in the possibility of a second rise later in the year.
In short: A basis point is one hundredth of one percentage point. A 25 basis point rise means the ECB rate increases by 0.25%.
What does this mean for Irish people?
In practical terms, a rate rise ripples through the economy in a number of ways.
- Prices: You have probably already noticed it. Higher energy costs feed through into everything from petrol to your weekly shop. That is the most immediate effect.
- Savings: When the ECB rate rises, banks typically pass some of that increase on to savers. You may see slightly better rates on deposit accounts as a result, though Irish banks have historically been slow to do so.
- Borrowing: The cost of borrowing money tends to rise alongside ECB rates. Variable rate loans, car finance and credit cards are all likely to edge upward.
- Mortgages: This is where many households will feel the impact most directly. Tracker mortgages move in line with the ECB rate automatically, so if you are on a tracker, your repayment will increase. Fixed rate mortgages are unaffected for the duration of your fixed term. Variable rate mortgages and those coming off a fixed rate deal are the ones most at risk of an increase.
Two of Ireland’s non-bank lenders, Finance Ireland and ICS Mortgages, have already moved rates upward in recent months. The main retail banks, while not directly tied to the ECB rate in the same way, have historically used rate-rise environments as an opportunity to increase their own variable and standard rates.
What should you do now?
- Start by checking what type of mortgage you are on. If you are unsure, your mortgage statement or your lender’s app will tell you.
- If you are on a tracker, you should expect your monthly repayment to increase in line with the ECB rise. Now is a good time to review your budget.
- If your fixed rate is ending soon, do not wait until it expires. Talk to a mortgage advisor before your rate ends so you have time to compare your options across the market.
- If you are on a variable rate, consider whether fixing now makes sense. Locking in before further rises could save you money over the next three to five years.
- If you have savings sitting in a current account, it is worth checking whether a higher deposit rate is available. Small increases in savings rates can still make a meaningful difference over time.
A conversation with a mortgage broker costs you nothing and takes less time than you might think. They can tell you what your existing lender is likely to offer, and whether switching to a new lender would give you a better deal. In most cases, the best rates go to new customers, not existing ones.
Update 5th June 2026
Update: why this moment is different from 2011 and 2022
Since this post was first published, analysis from the Financial Times has added useful context to the question of why central banks are moving now, and what we should expect next.
The current situation is being compared to two previous energy shocks: the political unrest across the Middle East and North Africa in 2011, and Russia’s invasion of Ukraine in 2022. The outcomes of those two episodes were very different. In 2011, inflation rose but remained relatively contained, and rates stayed on hold. In 2022, inflation surged sharply and rates rose significantly.
The difference came down to two factors: how severe the shock was, and the state of the economy when it hit.
This time, we are dealing with a third major supply shock in six years, following Covid and Ukraine. That matters because the inflationary effects of the 2022 shock had not been fully squeezed out before this new shock arrived. Household and business inflation expectations were already elevated, and they have risen further since the conflict in the Middle East escalated. When expectations rise, businesses and workers start to build higher inflation into their pricing and wage demands, and that can create a feedback loop that is difficult to break without raising rates.
The good news is that the labour market is looser now than it was in 2022, which reduces the likelihood of a severe wage-driven inflation spiral. That is why most analysts, including those cited in the RSM analysis linked in this post, expect the current rate-rise cycle to be shallower and shorter than what we saw after Ukraine.
But the sensitivity to inflation is higher than it has been at any point in the last decade. And that is precisely why the ECB is moving now rather than waiting.
For Irish households, the implication is the same as outlined above: the direction of travel on rates is upward, the pace is uncertain, and acting now on your mortgage or savings position is better than waiting to see what happens next.
FAQ
What is the ECB rate and why does it matter to me?
The ECB rate is the interest rate set by the European Central Bank for lending to banks across the eurozone. When it rises, the cost of borrowing money typically increases across the economy, affecting mortgage rates, loan rates and the returns available on savings accounts.
Will my mortgage repayment go up if the ECB raises rates?
It depends on your mortgage type. Tracker mortgages rise automatically in line with the ECB rate. Fixed rate mortgages are unaffected until the fixed term ends. Variable rate mortgages may increase at the lender’s discretion.
Is now a good time to fix my mortgage?
If you are currently on a variable rate or your fixed rate is ending soon, it is worth speaking to a mortgage advisor now. Fixing before further potential rises could protect your repayments for the next several years. A broker can compare your current lender’s offer against the wider market at no cost to you.
Should I be worried about my savings?
Not exactly, but it is worth reviewing. Rate rises can lead to better deposit rates, and it is worth ensuring your savings are working as hard as possible. If your money is sitting in a low-interest current account, there may be better options available.
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