Saturday 19 October 2019

Banks fleece homeowners for extra €2k as EU rates fall

Banks turn screw on mortgage holders as European rates fall

(Stock photo)
(Stock photo)
No rationale for change: Diarmuid Kelly from Brokers Ireland
Charlie Weston

Charlie Weston

Irish banks are lumbering their customers with even steeper mortgage bills at a time when rates across the eurozone are falling.

They have pushed up the cost of taking out a mortgage, bucking the trend elsewhere in Europe.

Central Bank figures show mortgage rates here remain the second most expensive in the currency zone.

The average interest rate on a new mortgage was 3.03pc in April, which is a rise compared to what was charged in the previous month.

This is almost double what people are charged in the likes of France and Germany.

Borrowers here are paying €150 more a month on average than mortgage holders in the rest of the currency bloc.

Only in debt-ridden Greece are mortgage rates higher than in this country. Mortgages are cheaper in 17 other eurozone countries.

It comes at a time when the European Central Bank (ECB) lending rate for banks has remained at 0pc for a number years now.

Last week, the ECB committed to keeping its key 'repo' lending rate for banks at its record low until the middle of next year.

The ECB said it now expected to keep interest rates on hold "at least through the first half of 2020".

It is highly unusual for the bank to be so specific about its rate-rising plans.

This prompted calls for banks here to reduce all their retail mortgage rates.

Statistics from the Central Bank show the average new mortgage rate here in April was 3.03pc, up 0.03pc. This compares with the average rate for the euro area of 1.7pc, down from 1.74pc in March.

High mortgage rates relative to those in other European countries are one of the reasons first-time buyers are struggling to be able to buy.

They are already being hit by a shortage of properties, with those renting paying record amounts, making it difficult to get a deposit together.

Banks are also paying little or nothing in deposit rates. Interest on new household deposits was just 0.04pc in April, the Central Bank said.

Lending limits, which mean you can qualify for a mortgage based only on three-and-half times your income, are also holding back potential buyers.

It was revealed this week that banks failed to use up their full allocation of exemptions to the loan-to-income lending limit last year.

The trend of falling mortgage rates appears to be over for now in Ireland, according to Daragh Cassidy, of price comparison site

"In fact, average rates increased by 0.03 percentage points here to 3.03pc in April, while they decreased by 0.04 percentage points in the eurozone to just 1.7pc.

"This means the average first-time buyer is paying an extra €154 a month for their mortgage, based on a loan of €225,000 paid back over 30 years."

He said the higher-than-­average interest rates in this country, coupled with the continued rise in house prices, are putting added pressure on affordability for first-time buyers.

Brokers Ireland said it was disappointing the weighted average interest rate on new mortgages had increased.

Diarmuid Kelly, from the organisation, said: "There is no real rationale for this change, on the contrary the international environment would indicate otherwise."

He said that people in the rest of the eurozone knew the precise interest rate they would be paying for the next 20 years or more.

Irish Independent

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