Irish mortgages have higher rates than rest of eurozone
Published 09/08/2014 | 02:30
New mortgages and personal loans cost more here than in the rest of the eurozone, illustrating the high price householders are paying to repair the broken banks.
First-time buyers are being stung with rates that are 0.5pc higher than other countries using the euro, new figures from the Central Bank show.
This means a homeowner in Ireland with a €200,000 mortgage will pay about €600 a year more than in other countries.
Personal loans are also more expensive, while savers with newly opened accounts are earning less than 1pc interest.
A lack of competition in the Irish market is has been blamed for the high charges.
Deputy chairman of the Consumers' Association Michael Kilcoyne said banks were exploiting the fact that there was little competition in the market following the closure of a number of retail banks since the financial collapse in 2008.
"There is no competition between the banks. They are doing what they like. The Minister for Finance and the Central Bank should intervene to make it fairer for consumers."
He said it was important that young people who want to take out a mortgage are able to get access to good value home-loans.
The Central Bank figures show that new mortgages taken out by households had an interest rate of 3.15pc at the end of June, down slightly from what was being charged in May.
This was an average of both variable and fixed rates on new mortgage lending, the Central Bank said.
But across the 18 countries that use the euro currency the average cost of a new mortgage was 0.51pc cheaper. This indicates that banks here were making higher profits on new lending for home buying than banks in the rest of the eurozone, financial experts said.
Before the financial crash in 2008, mortgage interest rates here were closely aligned to the European Central Bank lending rate.
But since the financial collapse, banks have hiked up variable rates for new and existing mortgages.
AIB and Bank of Ireland issue the lion's share of new mortgages at the moment.
The Central Bank said there was a fall in the interest charged by banks on existing mortgages in June, reflecting the cut in tracker mortgage rates that month, which was a boost for 375,000 tracker mortgage holders.
A spokesman for the Irish Banking Federation said: "Interest rates are a competitive matter between individual institutions, determined with due regard to a range of factors which include the impact of the cost of funds, the role of deposits, as well as their important role in supporting the economy."