Irish mortgage rates still below euro average

IRISH HOMEOWNERS continue to benefit from more favourable mortgage rates than their European counterparts, due in part to the proliferation of tracker mortgages in the Irish market.

Figures released by the Central Bank yesterday show the average interest rate on Irish mortgages of more than five years’ maturity stood at 3 per cent at the end of April. This compares to an average euro zone rate of 3.8 per cent.

Interest rates for new mortgages stood at 3.05 per cent compared to an average of 3.2 per cent in the euro area.

Tracker mortgages, which track the European Central Bank interest rate, were widely offered during the boom years.

The cost of repayments on these mortgages has fallen this year after two successive ECB rate cuts towards the latter part of last year. The ECB’s base rate is 1 per cent.

Irish savers are also being rewarded with higher interest rates than their European counterparts. According to the Central Bank, this reflects efforts by Irish resident credit institutions “to secure additional funding by offering attractive rates on longer-term deposit products”.

Irish lenders are now offering an average interest rate of 3.53 per cent on deposits, compared to the average euro area rate of 2.8 per cent.

However, yesterday’s figures also show Irish borrowers pay more for short-term credit than other borrowers in the euro zone.

Interest rates on short-term loans of up to a year – which include overdrafts and credit card loans – stood at 8.64 per cent in Ireland. While this represents a 7 percentage-point drop on the previous month, it is higher than the euro zone average of 7.97 per cent.

Interest rates on non-mortgage loans to households in Ireland stood at 5.87 per cent, slightly down from the previous month.

Unsurprisingly, the Central Bank noted a “compositional shift” in household deposit trends, with savers moving out of short-term products which are redeemable at notice and into longer-term deposits with agreed maturity, reflecting current rates of interest for both instrument categories.

Figures released by the Central Bank showed Irish banks’ reliance on Irish and European central bank funding fell by just over €2 billion in the month to May 25th. The total amount of official lending to Irish commercial banks stood at about €125.9 billion at the end of May, down from €128 billion in April and €130 billion in March.