High costs of mortgages sees borrowers being hit for excess charges of up to €80,000 over the life of a loan
THE high costs of mortgages in this country mean borrowers are being hit for excess charges of up to €80,000 over the life of the loan.
Average mortgage rates in this market are almost twice the level charged in the rest of the eurozone.
The average interest rate on all new mortgages is this country was 2.98pc in July, according to the Central Bank. This was down slightly since the beginning of the year.
The average rate for the euro area stood at 1.54pc.
Irish rates are the second highest in the eurozone, after Greece.
Calculations by Brokers Ireland show that what is charged here means new mortgage borrowers can expect to pay at least €80,000 more than their European counterparts.
This is based on a €300,000 mortgage over 30 years.
The lobby group for mortgage brokers worked out that a rate of 2.98pc means an Irish mortgage holders can expect to pay €454,000 back on a €300,000 mortgage.
People in the euro area can expect to pay back €374,000.
Chief executive of Brokers Ireland Diarmuid Kelly said: “This is money that Irish mortgage holders could otherwise be putting towards planning for their children’s education or their retirement. It is substantial.”
Mr Kelly said that banks have been lowering their rates in the last few months, but not enough to close the gap on the average figure for the eurozone.
He welcomed the fact that “a fraction more competition between lenders is evident in the market lately”.
Banks argue that they cannot radically reduce rates as they are required to set aside more capital when they issue a mortgage than European banks, a legacy of the financial collapse here.
And they argue that the high cost and length of time it takes to repossess a property from those who are not paying their mortgage also puts them at a disadvantage.
The Central Bank figures show that consumers are increasingly opting for fixed-rate products. Three out of four of new mortgage agreements in July were for fixed-rate mortgages.
Mr Kelly said borrowers were looking for greater security in a world filled with uncertainty, given Brexit and wider global volatility.