Homeowners currently holding a tracker mortgage are being warned to stay with their current plan to avoid being hit by increases in variable rates. The announcement last week by Permanent TSB that it was about to raise its variable interest rates by a half a per cent on mortgages was met with dismay by many and insiders are saying this may not be the last increase this year.

Speaking to the Galway Independent, a local financial expert warned homeowners not to expect a "silver lining" and said he believed it is a certainty that the other borrowing institutions will follow suit.

"Any institution that can do it, will do it. Those who are involved in the Government guarantee scheme will be slow to move because of the negative publicity, but they will implement it as soon as they can," said Gerry Cuddy, Director of Business Development at HC Financial Services in Galway.

Mr Cuddy said there are fewer options in the market now and urges those on tracker mortgages not to change for any reason.

"For those on tracker mortgages, the most important thing to do is to hold onto those, don't let them go for whatever reason. Banks will induce people to go away from them.

"A lot of people are now looking to fix rates. However if those on trackers look to fix rates, they will lose their tracker. That is a big catch. Banks will ask people if they want a fixed rate; if they take it, they will get it for something like two years but then they will be put on a variable mortgage. They will lose their tracker."

He continued to say that those on variable or fixed mortgages have little leverage at present and that fixed rates will eventually go into variable mortgages. While the option of changing banks for a better option in the past may have been available, Mr Cuddy believes that nowadays this is not a runner.

Unfortunately for homeowners, Mr Cuddy also believes that Permanent TSB and other institutions will raise their rates again this year. This is worrying news as an increase is also expected later in the year by the European Central Bank (ECB).

"The banks have only one option in terms of increasing rates. They can only increase variable mortgage rates; they cannot increase tracker mortgage rates.

"All the banks who have variable rate mortgages will try to increase the margin on those. The problem is they are borrowing at a higher cost then they are, in some cases, charging. Certainly on tracker rates they are losing money at the moment."

Permanent TSB has not applied to join the National Asset Management Agency (NAMA), which makes their business slightly different to Irish Nationwide, Anglo Irish Bank, Bank of Ireland and AlB, all of which are included in NAMA.

"The Government do not have as much leverage with Permanent TSB as they do with the other banks. Any bank that has the opportunity to increase their margins on their loans will try and do that. And not just on home loans, but on overdrafts etc," explains Mr Cuddy.

"Permanent TSB has discretion on this in terms of these loans. On others where there is indexation to the European Central Bank rate, they don't have that latitude as they have given a commitment in terms of rate."

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