Ireland returns to top of euro zone league for mortgage rates

Ireland has reclaimed the position of having the highest mortgage rates in the euro zone, according to the latest data from the Central Bank.

The weighted average interest rate on new Irish mortgage agreements in July was 2.73 per cent, down 9 basis points on July 2020, but more than twice the euro area average of 1.28 per cent.

According to the Banking and Payments Federation Ireland, the average first-time buyer mortgage is about €250,000. That means someone borrowing this amount over 30 years is paying over €181 extra a month or almost €2,200 a year compared to European neighbours.

Brokers Ireland said that Ireland is back at “the top of the euro area league”, but that there has been a “continuing marginal improvement in the rate, reflecting more competition in the Irish market”.

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Volume

Brokers Ireland director of financial services Rachel McGovern said the 29 per cent increase in the volume of new mortgage agreements year-on-year in July was reflective of the pent-up demand for mortgages.

“If you can succeed in getting a mortgage it makes a great deal more sense financially than renting,” she said.

“In all but the two most expensive areas in which to buy property in Dublin, it is cheaper to service a mortgage than pay rent, substantially so in very many areas of the country.

“Secondly, increased competition in the mortgage market with the entry of nonbank lenders Avant Money and Finance Ireland is leading to better, more secure mortgage products, specifically genuinely long-term fixed interest rates, for the very first time.”

Daragh Cassidy, spokesman for comparison and switching website Bonkers.ie, said the fall in mortgage rates over the past year “is obviously welcome and the overall trend does appear to be downward, albeit very, very slowly”.

“However it’s still deeply frustrating that rates here remain so high compared to our eurozone neighbours and have done so for so long,” he said.

“Despite the impending exits of both Ulster Bank and KBC, there has actually been some good competition in the mortgage market in recent months with ICS Mortgages, EBS, Finance Ireland and Avant Money all reducing rates.

“However this isn’t feeding through to the average rate consumers are being charged just yet.

"Also, AIB, Bank of Ireland, and PTSB, which between them have around 70 per cent of the mortgage market, charge among the highest rates."

Interest rate

The Central Bank data shows the weighted average interest rate on new fixed rate mortgage agreements was 2.62 per cent in July, a decrease of 5 basis points on July 2020. Fixed rate mortgages accounted for 83 per cent of new agreements over the month.

For new variable rate mortgage agreements, the weighted average interest rate stood at 3.29 per cent. This was a decrease of 15 basis points on July 2020.

The volume of new mortgage agreements amounted to €718 million in July. That represented an increase of 29 per cent on July 2020, when volumes had declined significantly following the onset of Covid-19.

It also represented a 5 per cent increase compared with June 2021. Renegotiated mortgages amounted to €324 million in July, an increase of 29 per cent on the previous year.

The high volume of renegotiated mortgages in July was driven by a large volume of expiring fixed-term contracts, and subsequent renegotiations with one reporting institution. The weighted average interest rate for all renegotiated mortgages was 2.61 per cent in July.

New consumer lending agreements stood at €195 million in July, which was a 4 per cent decrease on July 2020. The average interest rate on consumer loans was 6.69 per cent, while the equivalent euro area rate stood at 5.25 per cent.