Irish mortgage rates still nearly double euro-area average

Banks continue to attach premium to variable rate mortgages despite upturn in business

The latest Central Bank data show the volume of new mortgage agreements amounted to €562 million in June, bringing new agreements to €5.6 billion over the past 12 months. Photograph: Matt Kavanagh

Despite numerous Government pledges to tackle the issue of high variable mortgage rates, variable rates here are still nearly double the euro-area average. New Central Bank figures show the average interest rate applied to new variable rate mortgages was 3.35 per cent in June while the equivalent euro-area rate was 1.83 per cent.

Mortgage interest rates in the Republic used to reflect the main European Central Bank (ECB) lending rate because of the high proportion of tracker mortgages issued during the boom.

Since the crash, however, Irish banks have failed to pass on lower interest rates set by the ECB to the 300,000 or so homeowners on variable rates, effectively attaching a premium to compensate for loss-making tracker mortgages.

The banks have defended their position by insisting that they face relatively higher funding costs as a result of the crisis and that lending into to Irish market represents a riskier proposition.


Fianna Fáil has proposed legislation to give the Central Bank new powers to cap interest rates, a move the Government has so far resisted, claiming it would be unconstitutional.

Dramatically more

Fianna Fáil finance spokesman Michael McGrath said the latest figures show that, despite modest reductions in mortgage rates, Irish mortgage holders are continuing to pay dramatically more than consumers elsewhere in Europe.

He said the disparity between Irish and euro-area rates meant that a borrower here with a mortgage of €200,000 was paying €250 per month more than they would be paying in the average euro-area country. “ There has yet to be a credible explanation for such a dramatic difference in the rates charges,” Mr McGrath said.

“To add insult to injury, Irish consumers are not only paying higher interest rates on their mortgages, they are earning less interest on their savings,” he said, noting the figures also showed interest rates on new household term deposits stood at 0.08 per cent in June, compared to an equivalent euro-area rate five times greater at 0.4 per cent.

Painfully slow

He said the progress of Fianna Fáil’s Bill to tackle excessive variable mortgage rates, which recently passed second stage in the Dáil, had been tortuous and painfully slow. “Despite not opposing the Bill at second stage, it is abundantly clear the Government does not want the Bill to become law,” he said.

The latest Central Bank data show the volume of new mortgage agreements amounted to €562 million in June, bringing new agreements to €5.6 billion over the past 12 months.

Although the share of fixed rate mortgages is increasing, variable rate mortgages accounted for 60 per cent of all new agreements here in the past year. The equivalent euro-area share of variable rate mortgages is 15 per cent.

Supplementary quarterly data show a fall in standard variable rates for outstanding owner-occupier mortgages. These fell by 12 basis points to 3.34 per cent in the second quarter.

Fixed rate owner-occupier mortgages rates also recorded a decline, with rates fixed for one to three years falling by 18 basis points over the same period. The share of fixed rate owner-occupier mortgages in new mortgage draw-downs increased in the second quarter, accounting for 46 per cent of all new owner-occupier mortgages, compared to 41 per cent during 2016.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times