Irish consumers still paying highest mortgage rates in Europe

Central Bank says Irish mortgage-holders paying twice as much as rest of EU

The volume of new mortgage agreements fell by 48% to €500m in January, compared with the previous month, as restrictions to curb Covid-19 dented activity

Irish consumers are still paying a massive premium on mortgage products compared to their European counterparts.

Figures from the Central Bank show the average rate charged on new mortgages here in January was 2.79 per cent, compared to a euro area average of 1.35 per cent. The Irish rate was the highest in the euro area.

The 1.5 per cent differential is estimated to cost Irish homebuyers an additional €80,000 on a typical €300,000 mortgage.

Critics say the premium levied on Irish borrowers is evidence of a lack of competition in the Irish market, a situation made worse by the recent departure of Ulster Bank.


The latest figures also show the impact of Covid-19 on the mortgage market here. The volume of new mortgage agreements fell by 48 per cent to €500 million in January, compared with the previous month, as restrictions to curb the virus dented activity. The headline figure was 7 per cent down on the same month last year.

Fixed-rate mortgages (including renegotiations) accounted for 80 per cent of all new agreements in January, the Central Bank said.

The number of new buyers opting for fixed rates has jumped sharply in recent years. Back in 2014 fixed-rate products accounted for just 10 per cent of Irish home loans.

The ultra-low interest rate environment internationally has resulted in some lenders pricing fixed-rate loans lower than variable ones. Fixed rates are usually higher than variable rates, the premium reflecting the certainty the borrower is guaranteed.

“The first point of note is probably that Ireland is now ranked as having the highest rates in Europe,” said Trevor Grant of the Association of Irish Mortgage Advisers.

“While indicative of the challenges faced here in terms of the need to bring rates down, it is important that mortgage holders, and potential switchers, are not altogether disheartened and/or dissuaded by the data.

“The fact is that, yes, our rates are higher for a variety of reasons – some of which can and should be addressed – but there is still a lot of competition in the market, and the cost-savings that many homeowners can make by switching their mortgage are better than they have been in many years.”

Separate Central Bank figures show total assets held by insurance firms here rose by €16.5 billion in the final quarter of last year to stand at €380 billion.

This is the highest level of total assets in the series to date, the regulator said.

Equity, bond and mixed investment fund (IF) shares were the largest drivers of this, responsible for €11 billion of the increase collectively, it said.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times