Monday 27 January 2020

Mortgage borrowers paying €2,000 more a year than European neighbours

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Charlie Weston

Charlie Weston

RIP-OFF mortgage rates in this country are costing new home buyers €2,000 a year more than our European neighbours.

New figures from the Central Bank show that average mortgage rates are double the Eurozone average in this country.

This is despite a slight fall in the home-loan rate in this country.

The Central Bank figures show the weighted average interest rate on all new mortgages was 2.9pc in November.

This was 11 basis points down since the start of 2019 when the rate stood at 3.01pc.

However, the Eurozone average was unchanged at 1.37pc, less than half of the rate here.

Only in Greece are mortgages more expensive than in Ireland, according to the Central Bank.

Daragh Cassidy of price comparison site Bonkers.ie said the fall in mortgage rates over the past year is welcome.

“However, we shouldn’t lose sight of the fact that we continue to pay higher rates than every other country in the Eurozone apart from crisis-laden Greece, and have done so for years.”

He said the average first-time buyer mortgage is €225,000, according to Banking and Payments Federation figures.

“This means someone borrowing this amount over 30 years is paying almost €174 extra a month or over €2,087 a year compared to our European neighbours.

“This is money that could have been spent on childcare, education, healthcare or so many other things.”

He advised those who already have a mortgage, other than a tracker, to switch to a better rate.

The new Central Bank mortgage rate figures come after a study by the Economic and Social Research Institute (ESRI) found that large numbers of mortgage holders do not understand basic aspects of how their home loan works, and are vulnerable to bad advice.

This is particularly the case with cash-back mortgage offers.

A behavioural research project run by the ESRI found people were drawn to high cash-back offers, even those which are ultimately more expensive.

This is because examples people were asked to consider had higher interest rates than mortgages that were not offering cash back.

Bank of Ireland, EBS and Permanent TSB offer cash to first-time buyers. They also offer cash back to switchers, with AIB and KBC also incentivising switchers.

The ESRI experiment found that mortgage holders offered a choice opted for a €2,200 in cash back to sign up for a mortgage.

This was in preference to an interest rate that was 0.4pc lower than the one that was part of the cash back.

ESRI economist Shane Timmons said taking the cash upfront in this case amounted to taking out a loan for €2,200 at an interest rate of 24pc.

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