Three-quarters of home buyers now opting for fixed-rate mortgages

Central Bank figures detail trend towards fixed-rate products

More than three quarters of Irish home buyers are now opting for fixed-rate mortgages, figures from the Central Bank show.

In the three months to February, a record 76 per cent of all new mortgage loans taken out in the State were on a fixed interest rate.

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.


However, some lenders are betting that variable rates will eventually fall even further in the future.

Fixed-rate products are the norm across Europe and the Central Bank figures indicated they accounted for 85 per cent of new agreements for the same three-month period in the euro area.

The figures also showed Irish mortgage holders continue to pay more than their European counterparts because of the premium rates charged by Irish banks.

They indicated the average rate charged on new mortgages here over the past 12 months was 2.91 per cent, compared to a euro area average of 1.35 per cent.

While the rate varied considerably across countries. Ireland had the second highest mortgage interest rates across the euro area in February, the bank said.

Umbrella group Brokers Ireland said Irish mortgage holders are paying 1.56 per cent over and above their euro area counterparts, which is costing them over €236 more every month on a €300,000 mortgage over 30 years and a massive €85,100 over the lifetime of the mortgage.

“While Irish rates have come down over recent times, this is still an enormous gap, with little justification for it,” director of financial services at Brokers Ireland Rachel McGovern said.

The Central Bank figures also reveal the volume of new mortgage agreements amounted to €574 million in February, an increase of 4.1 per cent on the same month last year.

The figures for March are expected to be greatly impacted by the onset of the coronavirus.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times