Irish household debt fell in the third quarter as borrowers focused more on repaying loans than taking on new credit.

Total household debt fell to € 151.2 billion in the third quarter from € 159.5 million a year earlier, the Central Bank of Ireland said in a report published on Tuesday. Still, Irish households remain among the most indebted in Europe at more than 150 per cent of income, according to the data, third only to Denmark and the Netherlands, who both have ratios above 200 per cent.

While Irish people continue to repay mortgages and consumer loans at a faster pace than taking on new borrowings, the gap has been narrowing in recent quarters, according to the Central Bank.

The average interest rate on new home loans stood at 3.76 per cent in the fourth quarter of last year, down from 4.13 per cent in the first quarter, as a raft of banks, led by Allied Irish Banks, cut borrowing costs amid political pressure as their own market funding costs and the main European Central Bank rate declined.

The average borrowing rate on outstanding mortgages in the country stood at 2.6 percent in the three months to the end of December. In this case, the continuing high level of low-cost European Central Bank tracker mortgages in the country, a legacy of lending before the property market crashed, pulled the average cost down.

Outstanding tracker mortgages carried an average rate of 1.07 per cent in the fourth quarter, compared to 3.96 per cent for variable-rate loans, which move up and down at the discretion of banks.