Cantillon: mixed messages on Irish mortgage rates

Amid the persistent heightened attention in recent weeks on mortgage rates that Irish banks are charging their customers, there is one curious anomaly which continues to persist: the Central Bank's publication of mortgage interest rates.

Last week, the bank indicated the rate on new variable rate mortgages was just 3.08 per cent as of end-April.

But how can this be when the lowest rate available to a property purchaser today is actually greater than this, at 3.1 per cent from KBC Bank? And that rate is only available to people who have a deposit of at least 50 per cent of the purchase price.

The reason apparently is that the 3.08 per cent rate mentioned in the Central Bank's report is drawn from the ECB's Monetary Financial Institution Interest Rate (MIR) framework. So, despite the name of the data, "Interest Rates on new floating rate loan agreements to households for house purchase", the figure published in the Central Bank's monthly statistics is actually based on a mix of fixed and variable contracts – and in addition to mortgages also includes home improvement loans.

It's a metric that allows the ECB to compare rates on a level footing in the euro zone, which is fair enough. But for those looking for a "fix" on Irish mortgage rates, the data can be confusing. Indeed in April the Central Bank itself published an article which acknowledged the MIR figure "is often mistaken to represent new mortgages with a standard variable rate".

So why does the Central Bank persist in using this data in its monthly bulletins and not in conjunction with its own data on mortgage rates, which it publishes on a quarterly basis, and which it says itself, are “more suited to domestic analysis”?

The Central Bank says it is bound by an ECB regulation to continue publishing the MIR data, but to avoid confusion it would be useful if it could publish its new business rates each time it publishes the MIR data – or at least explain the difference between the two.