Irish mortgage rates surge back above euro zone average, Central Bank figures show

The average interest rate on new mortgages jumped sharply in March, according to figures published on Wednesday by the Central Bank.

A dramatic 62-point jump in the average mortgage rate pushed Ireland back above the euro zone average for the first time in six months. However, mortgages in Ireland are still the fourth-lowest across the euro zone, behind only Malta, France and Spain.

People taking out new home loans last month signed up to an average mortgage rate of 3.54 per cent. That compares with an average of 2.92 per cent in February and 2.78 per cent in March last year. The average rate for mortgage loans also increased across the euro zone but by a more modest 0.19 of a percentage point, bringing it to 3.52 per cent.

Rates in Ireland surged in March as lenders here started passing on a greater portion of recent increases imposed by the European Central Bank. Until now, rates had been rising more quickly elsewhere in the euro zone as banks on the Continent moved more quickly to pass on ECB rates that have jumped by 3.75 percentage points since last July.

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“The trend of previous months whereby Irish lenders had been slow to pass on ECB rate rises to non-tracker mortgage holders has now been reversed,” said Rachel McGovern, director of financial services at Brokers Ireland.

But the Central Bank data shows that lenders here are still reluctant to increase variable rates which jumped by just 0.06 of a percentage point last month to an average of 4.38 per cent. Fixed-rate loans, by contrast, saw a far bulkier increase – 0.61 per cent – to 3.44 per cent. Fixed rates accounted for over 88 per cent of all mortgage lending in March.

Mortgage borrowing in the Irish market dropped in March to €732 million, down 31 per cent on the February figure and 9 per cent below the March 2022 total.

“Many mortgage holders who would have locked into fixed rates averaging 2.5 per cent in the last three to five years now face the reality of rolling off these low fixed rates and facing much higher rates in the coming 12 months or so, ” said Association of Irish Mortgage Advisers chairman Trevor Grant, who added that 50,000 homeowners with mortgages of €12 billion would come off existing fixed rates over the next three years.

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Rates are now almost three-quarter of a percentage point higher than they were this time last year. Over that period, the average across the euro zone has jumped by more than two percentage points.

“There is a generational expectation of low rates,” said Ronan Brennan, head of retail banking service delivery with Delta Capita. “Many households simply do not have the financial cushioning to withstand this increased demand on their finances.”

Deposit rates in Ireland remain significantly below euro zone averages.