Wednesday 12 December 2018

First-time buyers in Ireland paying multiples more for mortgage than European average

First-time buyers (Stock photo)
First-time buyers (Stock photo)

Charlie Weston Personal Finance Editor

First-time buyers here are paying multiples more for a mortgage every year than the European average.

The high rates are combining with a scarcity of properties to buy to price more new buyers out of the market, experts said.

New figures show that a typical new buyer is paying almost €157 more for their mortgage each month compared with the average in the Eurozone.

The latest figures from the Central Bank show that this country continues to top the league for the highest rates.

“Ireland continued to have the highest average interest rate across the euro area on all new mortgages agreed in August, at 3.15pc,” the Central Bank said in its latest statistical release.

The average interest rate issued on a new mortgage in August was 3.15pc. This was a slight fall from 3.21pc in July.

Although low for Ireland by historical standards, this compares with an average rate of just 1.77pc across Europe.

Separate figures from the Irish Banking and Payments Federation Ireland indicate that the average first-time buyer mortgage is now €218,702.

This means a typical first-time buyer who is borrowing that amount over 30 years will pay €156.40 a month more for their mortgage compared with the European average.

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Over a year this works out at almost €1,900 a year more being paid here by a typical new borrower than in the rest of the euro currency area, according to calculations by price comparison site Bonker.ie.

Daragh Cassidy of Bonkers.ie said that despite the recent rate reductions from some of the main banks, first-time buyers in Ireland continue to pay far more for their mortgage than buyers in any other country in the Eurozone, which is incredibly frustrating.

“Not only are first-time buyers being priced out of the market due to rapidly rising house prices, they also have to contend with the highest mortgage rates in the Eurozone, which puts added pressure on affordability.”

The Central Bank figures also show a rush by new mortgage customers and existing homeowners to fix their home-loan rate.

They are aiming to get ahead of expected rises in interest rates which have been predicted for the end of next year.

The figures show that more people are locking in to fixed mortgages than at any time in the past 15 years.

And home owners are fixing mortgages for longer, with a big move to three-and five-year deals.

Fixed rates accounted for 65pc of new mortgage lending in the three months to August.

This is up from 54pc in May.

However, this is still low by European standards where over 80pc of mortgages are fixed. 

Mr Cassidy warned potential first-time buyers who are at the start of the mortgage journey, to make sure to do research and shop around.

There is a large variation in interest rates and cashback incentives across all the different lenders, he said.

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