Irish households worth more than ever and mortgages still among dearest in EU

Households are paying second-highest interest rates for home loans

The weighted average interest rate on new Irish mortgage agreements was 2.74 per cent in June. Photograph: iStock

The weighted average interest rate on new Irish mortgage agreements was 2.74 per cent in June. Photograph: iStock

 

People in the Republic continued to save in the early months of 2021 with household net worth – that is assets assets minus liabilities – reaching a new high.

Overall, household net worth increased by 3.3 per cent or €28.5 billion to a high of €883 billion in the first quarter. This is equivalent to €177,493 per capita.

Separate data has meanwhile shown that households in the State are once again paying the second-highest interest rates for home loans in the European Union.

The Central Bank, which collated both sets of figures, said the rise in household net worth was largely driven by an increase in assets of €18.9 billion, and a jump in the value of insurance and pension schemes.

On an annual basis, net worth rose by €89 billion due to increases in both housing and financial assets.

Household net worth has grown annually since 2012. The recent rise in wealth comes amid the impact of the pandemic, with households on aggregate experiencing a €2.5 billion decline in pay compared with the first quarter of 2020.

Households have also seen a €3.9 billion rise in social transfers and subsidies from the State alongside a fall in consumption of €2.9 billion. These counteracting movements lessen the impact of unemployment and the fall in pay experienced by household net worth in aggregate, the regulator said.

Household debt fell by €1.5 billion over the quarter to stand at €128 billion. Total debt now equates to €25,717 per capita with household debt having decreased by 36 per cent since early 2009.

Mortgages

The weighted average interest rate on new Irish mortgage agreements was 2.74 per cent in June, down five basis points on the same month a year earlier. The average for the euro area stood at just 1.27 per cent in June, although the rate varied considerably across countries.

The weighted average interest rate on new fixed-rate loans was 2.61 per cent, down seven basis points on an annual basis. For new variable-rate mortgages, the rate stood at 3.40, up 20 basis points.

The volume of new mortgage agreements amounted to €687 million in June. This represents an increase of 40 per cent on the same month a year earlier.

Association of Irish Mortgage Advisors chairman Trevor Grant said the State’s high interest rates “have been a long-standing issue and whilst there are some banking and legal factors currently ensuring they will remain higher than average, there is still work that can and should be done to reduce interest rates overall, considerable savings are still possible on the part of the consumer, particularly when it comes to mortgage holders”.

The arrival of Avant Money into the mortgage market last year, along with mortgage lender ICS last week announcing that it is cutting the interest it charges across all its variable-rate and fixed-rate products were all good news for the customer, he said.

Brokers Ireland said such moves would bring Ireland’s rate more in line with those in Europe. Rachel McGovern, director of financial services at the brokers’ body, said: “The advent of genuinely long-term fixed interest rates, for periods of up to 30 years in the case of Avant Money, is a game-changer in the Irish market, bringing it closer to European norms for the first time.

“Long-term fixed interest rates give a great level of security around financial outgoings over an extended period, and now that can be for the lifetime of the mortgage,” she said.

“Up to very recent years mortgages were fixed typically for one to five years, and at higher rates than currently. That was a measure of how uncompetitive the market was.”

She said the message now for all mortgage holders was to review their mortgages and if in doubt seek impartial advice.