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Irish homeowners get better deal on interest rates than rest of EU

IRISH borrowers are paying well below the European average for their home loan, and savers here are getting a better deal than those in the rest of the eurozone, according to new Central Bank statistics.

The average interest rate charged on Irish home loans was just 2.98pc at the end of January, compared to 3.87pc across the whole of the eurozone, according to the new figures published last night.

The Central Bank said Irish borrowers were paying lower interest rates -- at least on average -- because most home loans here were so-called "tracker mortgages".

The interest rate on "tracker mortgages" falls, or rises, in line with the main European Central Bank (ECB) rate, which is set in Frankfurt.

The ECB has slashed its rates to an all-time low of just 1pc in recent months in an effort to kickstart the eurozone economy. The cost of the average Irish mortgage has fallen 0.44pc since September.

Every reduction of 0.25pc in rates means monthly repayments drop by €30 on a €200,000 mortgage -- so a typical monthly mortgage is down by over €50. The new data is sure to be seized on by Irish banks which say they are struggling to get back into lending because they lose so much money on the cheap tracker mortgages.

In some cases, banks are paid less from homeowners than they pay themselves to borrow from the markets.


The Government is even understood to be considering shifting the loss-making tracker mortgages out of banks such as AIB and Permanent TSB in an effort to get lending moving again.

Few homeowners, though, will sympathise with the banks.

People who bought in Ireland during the boom have larger home loans, and in many cases borrowed over much longer periods to buy houses, than most borrowers in the rest of Europe.

Irish borrowers will be hit harder if interest rates start to rise again.

Many homeowners are already paying well over the average for their mortgage.

Those with so-called "variable rate" mortgages have seen the cost of their home loans rise even as the tracker rates dropped.

Banks can set the interests rates on variable mortgages regardless of the standard interest rate set by the ECB -- state-owned Permanent TSB charges 5.19pc interest on some home loans.

The Central Bank said the average cost of even new loans was just 3.11pc in January.

This is a surprise, according to Frank Conway of MoneyCoach.ie.

He said the cheapest deal currently on the market was a 2.84pc mortgage from AIB, but it was only available for buyers putting up half the cost of their house.

Meanwhile, with the Irish banks desperate to get cash in, savers are being paid more for their savings, according to the same statistics.

Irish savers are getting an average rate of 3.57pc on fixed-term savings accounts up to two years, compared to a euro-area average of 2.76pc.

Irish Independent