PTSB today announced it is increasing interest rates on its fixed-rate mortgages.

It is the first of the main pillar banks to announce such a hike since the European Central Bank introduced two rate rises between June and September.

What will this mean for borrowers, and will other lenders follow suit?

Was this expected?

The PTSB increase does not come as a shock.

According to the Central Bank, inflation for the year is likely to come in at around 3.4% – which is well above the generally accepted healthy target of 2%.

To bring the rate back towards that 2% target across the euro zone, the ECB has introduced two separate interest-rate rises since June, totalling half a percentage point.

This means banks have to pay extra to borrow the money they lend out, and until now they have absorbed these increases.

But from today that has changed, with PTSB the first pillar bank to hike mortgage rates for borrowers since those ECB rises.

The lender is increasing interest rates on its fixed-rate mortgage products by a weighted average of 0.3 of a percentage point.

This means the rises will range from 0.2% to 0.35%, depending on the length of the fixed-term of the mortgage, the size of the loan, and the size of the loan relative to the value of the property.

There are no changes for PTSB customers on existing fixed rates and no changes to its variable rates.

Importantly, the bank also says customers who have already received an offer letter for a mortgage will have 90 days – up until 19 January 2027 – to complete the drawdown of their loans at existing rates or before their current loan offer expires, whichever date is the earliest.

Are other lenders likely to follow suit?

That is the fear now, as once one bank moves it is more palatable for the rest to follow.

We have seen a number of so-called non-bank lenders – the likes of ICS Mortgages, Nua Money, and Pepper Advantage – increase their interest rates in the last few months, however, PTSB is the first pillar bank to do so recently.

In what might appear as an argument against more rises, last week AIB lowered its four-year fixed rate for mortgages over €250,000.

But that move is largely being viewed as move to win some new business.

It is expected the ECB will increase borrowing rates once more before the year is out, so it will get harder for other banks to hold out and keep their rates low – because their own borrowing costs will go up.

All eyes will be on AIB and Bank of Ireland in particular to see if they make a move upwards.

Will rate increases be good for savers?

For anyone who can still manage to have spare money to put away amid the current cost-of-living situation, the current rate-rise trend is a positive.

Off the back of the ECB increases, a number of banks – including the fintechs – have put their rates for savers up recently, albeit marginally.

Bank of Ireland today continues that trend, saying it is increasing interest rates across a range of its fixed-term savings accounts.

The lender said interest rates on its six, 12 and 18-month Advantage Fixed-Term Deposits will go up by between 0.25% and 0.5% of a percentage point.

But existing fixed-term deposit customers will continue to earn interest at their existing rate until the end of their current term.

Though, the increase still leaves the top Bank of Ireland rate in terms of fixed-term deposits (2.48% AER for the 18-month account) a bit behind in terms of value when compared to the fintechs (for example Bunq and Raisin offer more than 3% AER for similar savings accounts).

Higher rates for savers are definitely good news, and might encourage other banks to make similar moves.

But the question some will ask now is: could this be a precursor to Bank of Ireland increasing mortgage rates in the near future?