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Mortgage interest rates fall 15 times faster than in eurozone

Average rate paid by homeowners here down 12.6pc, compared with 1pc in eurozone countries

INTEREST rates paid by Irish mortgage holders are now falling more than 15 times as fast as rates paid by homeowners across the eurozone.

Data from the ECB shows the average interest rate paid on mortgages here has fallen by 12.6pc over the last six months -- against a fall of less than 1pc across the eurozone.

The Central Bank of Ireland (CBI) drew attention to the recent divergence between interest rates in Ireland and the eurozone in its February interest rate bulletin.

In it, the CBI pointed out that Irish rates had fallen by 0.44- percentage points in the five months from end September to end February, while eurozone rates fell "by just 6 basis points" (or 0.6 percentage points).

But Ciaran Phelan, CEO of the Irish Brokers Association, lashed out at the comparison made by the Central Bank and its "apparent inference" that "mortgages are cheaper in Ireland".

"The missing factor in this data is that, as a result of the property boom, Irish mortgage holders have far bigger mortgages than their European counterparts," he said. "It would be more relevant to contrast the average mortgage repayment in Ireland with that of the eurozone."

The Central Bank yesterday said data on the average mortgage repayment for the eurozone countries was not available. The ECB was also unable to immediately provide the data.

The available ECB data shows that Irish and eurozone rates are both roughly unchanged in the year from February 2011 to February 2012.

This suggests that the recent divergence between Irish rates and rates across Europe may be down to a timing issue around when rises and falls in the ECB rates are passed on in various countries.

After the latest fall, Ireland now has the fourth lowest mortgage rates in Europe, with homeowners charged an average of 2.98pc a year.

The actual amount paid is less, once mortgage interest relief is factored in. The only countries with lower rates than Ireland are Portugal (2.63pc), Finland (2.42pc) and Luxembourg (2.16pc).

The highest mortgage interest rates are in Slovakia, where the average interest rate in February was 5.16pc. Rates there are at least falling, coming down from their 5.47pc rate in February 2011.

The healthier Western European countries generally have higher rates than Ireland. The average rate in Germany is 4.47pc, in Belgium it's 5.14pc and in France it's 3.94pc.

The higher rates reflect in part a greater tendency by borrowers in Germany in particular to opt for long-term fixed mortgages rates. Those rates would be higher than variable rates now since European rates are at record lows. Stricken Greece, meanwhile, has average mortgage rates of 3.59pc.

Irish Independent