Business Irish

Sunday 17 November 2019

Mortgage rates in Ireland twice the average level for Eurozone

Photo: Stock Image
Photo: Stock Image
Charlie Weston

Charlie Weston

MORTGAGE interest rates in this country are twice the average level for the Eurozone.

Rates here fell below 3pc in September.

But the fall was sharper in most other countries, a move that widened the gap between Irish mortgage rates and the average across the Eurozone.

This means typical new buyers here with a €300,000 mortgage over 30 years are paying €235 more a month than the average for the currency bloc.

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This works out at €85,000 over the lifetime of the mortgage, according to calculations by Brokers Ireland.

The brokers were reacting to new Central Bank figures showing the average interest rate on all new mortgages was 2.96pc in September. This was down from 3.07pc the previous month.

In contrast, the average for the Eurozone is just 1.41pc.

Director, financial services, at Brokers Ireland Rachel McGovern said new borrowers here are paying €2,820 more a year than the average paid by borrowers in the euro area.

“Small percentages amount to a massive sum over the lifetime of a mortgage. And this is money foregone that could otherwise be put towards children’s education into the future or pension planning,” she said.

Ms McGovern said the fact that more than seven in every ten mortgage holders are now opting for fixed rate shows consumers are seeking greater security.

Mortgage rates in this country remain the second highest after those in Greece.

Brokers Ireland urged mortgage holders now coming off fixed rates to shop around rather than falling automatically back onto the standard variable rate, which in many cases will be higher than the 2.96pc average rate published by the Central Bank.

Daragh Cassidy of price comparison site Bonkers.ie said rates have fallen slightly over the past year, but they remain way too high.

“Worryingly, the gap between the average rate charged in Ireland and in the Eurozone only appears to be getting bigger,” he said.

He said that over the past year the average rate here has fallen by 0.11pc, but it has plummeted by 0.35pc in Europe.

“Quite simply Irish mortgage holders aren’t benefitting to the same extent from the ultra-loose monetary policy from the European Central Bank that the rest of Europe is enjoying.”

He said there are some valid reasons as to why mortgage rates in Ireland would be slightly higher than other Eurozone countries, although he said there is no reason for such a big gap.

Banks here blame higher levels of arrears and the difficulty repossessing properties, where the mortgage is not being paid, for the high lending rates and near-zero deposit interest.

And banks here are required to set aside more capital than their Eurozone counterparts when they issue a mortgage due to high default levels.

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