Irish mortgage interest rates fell to a 17-month low in October, according to Central Bank figures, but the gap between the average rates available here and across the euro zone as a whole widened.
The average weighted interest rate on new mortgages at the end of October was 4.03 per cent, down from 4.08 per cent in September. Despite three quarter point cuts by the European Central Bank, the average rate is less than a quarter point lower than in October 2023.
Across the euro zone as a whole, equivalent rates fell by nine basis points – from 3.61 per cent to 3.52 per cent. And over the past year, rates have fallen over twice as fast across the euro zone as a whole than they have in Ireland, the Central Bank said.
Rates do vary widely across the bloc, from 1.77 per cent in Malta to 4.89 per cent in Latvia, with Ireland’s rate being the sixth highest.
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Fixed rates, which account for 72 per cent of new mortgages by volume, fared slightly better with the average rate falling to 3.89 per cent in October, down by just over a third of one per cent over the past year.
While mortgage rates were falling, the Central Bank said the average interest rate on new consumer loans was 13 basis points higher at 7.87 per cent in October, compared to 7.74 per cent the previous month. Variable rate consumer loans – which account for three-quarters of the business – were charging 8.46 per cent, almost 2.3 percentage points higher than what you could expect to pay for the some money at a fixed rate.
On savings, rates for on demand, or overnight, deposits hit a seven year high after rising for the first time this year. But the increase was the minimum – 0.01 of a percentage point – to an annual return of just 0.14 per cent.
The return on fixed rate savings also rose by the minimum possible, bringing the average rate to 2.64 per cent. That is still short of the 2.73 average across the euro zone but that euro zone rate is a quarter of a percentage point lower than it was in September.
“Although Irish mortgage rates continue to move lower, they’re falling more slowly in Ireland compared to the rest of the euro zone,” said Bonkers.ie spokesman Daragh Cassidy. “There is now a half a percentage point gap between the average rate here in Ireland and the average rate in the euro zone, which you’d hope isn’t going to get any bigger.”
Mortgage rates are expected to continue to fall over the next year, starting with an expected cut by the ECB on Thursday.
Tracker mortgage customers will benefit the most, as their rates move in line with ECB rates automatically. But Mr Cassidy noted that “so-called mortgage prisoners whose loans were sold to vulture funds, some of whom are still paying extortionate variable rates as high as 7 per cent or more right now” would also benefit..
Brokers Ireland deputy chief executive Rachel McGovern said the hope was that greater competition in the market will lead “not just to better rates but to better mortgage products, such as rate options fixed for very extended periods, the type that while relatively new in the Irish market were largely pulled after July 2022 when the ECB began increasing rates. Such rates are the norm in many European countries and in the US.”
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