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Mortgage rates in Ireland rise at highest amount in five years

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Christine Lagarde, president of the European Central Bank. ECB rates had been expected to rise this year but that now looks unlikely.

Christine Lagarde, president of the European Central Bank. ECB rates had been expected to rise this year but that now looks unlikely.

Christine Lagarde, president of the European Central Bank. ECB rates had been expected to rise this year but that now looks unlikely.

MORTGAGE interest rates in Ireland have gone up by the largest amount in almost five years.

This is despite the European Central Bank holding back on increasing wholesale rates.

The typical new mortgage rate was up 0.7pc in January, the largest monthly increase in almost five years.

Ireland the second most expensive in the Eurozone after Greece, new figures from the Central Bank show.

The high cost of mortgages adds to the cost-of-living squeeze with runaway rises in the cost of petrol, diesel, home-heating oil and home energy hitting consumers hard.

The typical rate here in the first month of this year was 2.76pc, which is more than double average of 1.31pc for the Eurozone.

High mortgage rates are adding more than €2,200 a year to cost of living in Ireland.

This is the annual amount of money new borrowers are paying in this country compared with the average cost for others in the Eurozone.

Finland again has the lowest average mortgage rate in the Eurozone at just 0.79pc, closely followed by Portugal at 0.80pc.

The Eurozone average is 1.31pc, up from 1.29pc in December, the Central Bank in Dublin said.

It is the first time in almost five years that the average rate in Ireland has increased so much over the space of a month, according to Daragh Cassidy of price comparison site and mortgage brokers Bonkers.ie.

Financial markets had been pricing in two European Central Bank (ECB) rate rises this year, which would make variable, trackers and new fixed rates even more expensive in this country.

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But the supply-side inflation and the economic shock to the global economy from the Russian aggression in Ukraine means ECB rate rises this year are unlikely.

The rise in rates for new mortgages here has been put down to the fact that more first-time buyers are now opting for fixed rates of 10 and 20 years, which are more expensive than short-term fixes.

Mr Cassidy said: “Mortgage rates have been falling slowly but steadily in Ireland over the past several years. And they continue to fall, for now at least.”

He said the average rate has now increased suggests more first-time buyers might be opting for longer-term, more expensive fixed rates than previously.

“This would be unsurprising as there has been talk in recent months of the ECB starting to increase rates.”

Fixed rates of up to 30 years are now available in Ireland.

Mr Cassidy said that the rapid rise in property prices might also be having an effect.

Lenders price their mortgage rates based on how much equity someone has in their home or the size of the deposit they have in relation to the loan.

This is usually referred to as the loan-to-value (LTV) ratio.

The larger the deposit a homebuyer has the better the rate they will be offered by most lenders.

But surging property prices mean buyers who previously may have been able to avail of a cheaper rate for those with an LTV below 80pc are now being pushed into a higher LTV band instead.

The average first-time buyer mortgage in Ireland is around €262,000.

This means someone borrowing this amount over 30 years is paying almost €187 extra a month, or over €2,200 a year, compared to our European neighbours.

Banks in this country say they are forced to charge more here because mortgage lending in Ireland is considered risky, partly because banks have difficulty enforcing security if a loan goes into arrears.

This means Irish banks must hold around three times the level of capital to safeguard against potential loan losses compared to banks in the rest of Europe.


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