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Mortgage rates here down but still second highest in Eurozone

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European Central Bank (ECB) President Christine Lagarde. The ECB put up lending rates last month. Photo: Reuters/Kai Pfaffenbach

European Central Bank (ECB) President Christine Lagarde. The ECB put up lending rates last month. Photo: Reuters/Kai Pfaffenbach

European Central Bank (ECB) President Christine Lagarde. The ECB put up lending rates last month. Photo: Reuters/Kai Pfaffenbach

IRELAND was the only country in the Eurozone to see mortgage rates fall in June, but we still have the second highest rates in the currency zone.

And the gap between home-loan lending rates here and the rest of Europe has closed over the past few months.

The figures were recorded before the European Central Bank (ECB) announced a shock 0.5pc rise in its key lending rates last month.

The average new mortgage rate in this country was now 2.68pc in June, down from 2.73pc in May, according to the latest data from the Central Bank of Ireland.

Ireland is the only country in the 19-member Eurozone to see a month-on-month fall in rates.

In June all other countries saw a rise in their average rate, some of which were significant.

However, the average interest rate on a new mortgage in Ireland is second only to Greece in the 19-country Eurozone. Rates are at 3.10pc in Greece.

The Eurozone average is 1.90pc, its highest level since at least August 2017.

By contrast, the average Irish mortgage rate is at its lowest on record.

A new buyer couple borrowing a typical €270,000 over 30 years in this country will end up paying €105 more a month than the average in the Eurozone.

This works out at a gap of €1,260 over a year.

There has been mixed news on the mortgage front at home in recent months with Permanent TSB, Bank of Ireland and EBS all reducing some of their rates.

But ICS Mortgages, Avant Money and Finance Ireland have increased some of theirs.

Daragh Cassidy of price comparison site Bonkers.ie said it was ironic rates are falling here and rising in other Eurozone countries while the ECB is pushing up its key lending rates.

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“There’s something deeply ironic that as the ECB has started to hike rates, and as rates in every other country in the Eurozone have begun to skyrocket, they’re falling here.”

The ECB rise last month prompted all the major lenders to say they will not be passing on the hike to their fixed or variable-rate customers for now.

But tracker rates will go up this month.

Mr Cassidy said this meant that later in the year we could see Ireland having rates very close to the Eurozone average, for a while at least.

“This would be a bizarre but very welcome turnaround.”

Rates in Germany at 2.59pc, are now almost as high as they are in Ireland which no one would have predicted a few months ago.

Mr Cassidy said the ECB has signalled that it will continue to raise rates, which could go up another 1 percentage point.

“Most of this increase will eventually be passed on to mortgage customers. How much depends on the competitive pressures the banks feel under. I could see another 0.25 percentage point increase not being passed on by the banks,” Mr Cassidy said.

He said anyone on a variable rate should seriously consider locking into a longer-term fixed rate.

Banks blame Central Bank rules that require them to put aside more capital when issuing a mortgage than their counterparts in the rest of the Eurozone.

This is seen as a legacy of the financial crash more than a decade ago.

They also argue that the slow processes of repossessing, even when nothing has been paid on a mortgage for 10 years, is a key factor for rates being higher here than the rest of the Eurozone.


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