Irish banks charge highest mortgage rates in euro zone

Central Bank data show rates here are on average 1.5 percentage points higher

The Republic had the joint highest mortgage interest rates across the euro area, according to Central Bank data. Photograph: iStock

The Republic had the joint highest mortgage interest rates across the euro area, according to Central Bank data. Photograph: iStock

 

Irish banks are charging the highest mortgage rates in the euro zone, according to the Central Bank of Ireland (CBI).

The regulator’s latest monthly data on interest rates show the average rate charged on new mortgages here over the past 12 months was 2.79 per cent.

This compares to a euro zone average of 1.26 per cent.

The differential costs Irish consumers almost €80,000 on a €300,000 mortgage over 30 years.

The Republic had the joint highest mortgage interest rates across the euro zone, the Central Bank said.

The premium levied on Irish borrowers has been linked to a lack of competition in the mortgage market here, which is likely to get worse with the Ulster Bank and Belgian lender KBC both intending to exit the market.

“Month-on-month these reports from the CBI draw attention to the fact that Ireland has some of the highest mortgage interest rates in the euro zone - we have now reached the point where we have the joint highest mortgage interest rates across the euro area,”said Trevor Grant, chairman of the Association of Irish Mortgage Advisors.

Higher end

“Unfortunately, Ireland is likely to stay at the higher end of the rate spectrum some time for a variety of reasons, but at a practical level it’s important for Irish mortgage applicants and homeowners to know that just because our rates our expensive when compared with other countries, there is still relatively good value to be secured in the Irish mortgage market, so it’s crucial that people don’t just accept the rate quoted by one lender,” Mr Grant said.

The CBI’s figures show fixed-rate mortgages accounted for 81 per cent of new agreements in March.

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

Fixed rates are usually higher than variable rates, the premium reflecting the certainty the borrower is guaranteed.

However, the ultra-low interest rate environment internationally has resulted in some lenders pricing fixed-rate loans lower than variable ones.