Irish mortgage rates fell surprisingly in February

Irish mortgage rates fell marginally in February, according to fresh data to be published by the Central Bank on Wednesday.

While the fall of 0.01 of a percentage point from an average of 2.93 per cent in January to 2.92 per cent, was negligible, it marked Ireland as one of only two countries in the euro zone to record a drop over the period. Malta was the only other country where rates fell.

It also means that Ireland has the third-cheapest mortgage rates in the euro zone with the rate here almost half a point below the average.

According to the data from the European Central Bank, the average mortgage rate across the euro zone in February was 3.33 per cent, almost three times the rate it stood at about 18 months ago.

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“These figures show once again how slow the main banks have been at passing on the ECB rate increases to mortgage customers,” said Daragh Cassidy of mortgage brokers and price comparison website bonkers.ie.

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“Since last July, the ECB has hiked rates by 3.5 percentage points. However, the main Irish banks have only increase their fixed rates by around 1.5 to two percentage points on average. And variable rates have hardly moved at all,” he said.

He noted that the cautious approach to rate increases by Irish banks had “largely come at the expense of savers. Savings rates in Ireland are still miserable. The best rate is just 1.5 per cent with Permanent TSB. And Bank if Ireland only pays a maximum of 0.75 per cent. However rates deposit over 3 per cent are now widely available in Europe.”

He said Irish savers were “heavily subsiding mortgage holders. Whether that’s right will differ vastly depending on whether you talk to a mortgage holder or someone with big savings.”

He also warned that rates were likely to climb for mortgage holders in the months ahead.

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“These figures are based on mortgages drawn down in February but which may have been applied for several months before. Anyone who applies for a mortgage today will be faced with much higher rate options.”

As of now, the lowest variable rate for a standard first-time buyer borrowing €270,000 with a 10 per cent deposit is 3.15 per cent with Haven while the best fixed rate is 3.4 per cent with Bank of Ireland or Avant. Mr Cassidy said these rates “are still competitive compared to rates on offer elsewhere in Europe”.

He also pointed out that the Central Bank figures “only take into account mortgages drawn down with AIB, Bank of Ireland and PTSB. The non-bank lenders aren’t included in these monthly figures. If they were, the rate would be higher.

“Looking forward, the ECB is likely to hike rates again next month – perhaps by just 0.25 of a percentage point this time. But this still means more hikes from all lenders are almost guaranteed over the coming months,” he said.