Irish mortgage rates on new home loans fell in July even as the European Central Bank raised interest rates for the first time in over a decade. At 2.63 per cent the average Irish mortgage rate was at its lowest in at least five years and, for the first time in over two years, the State was not ranked among the three most expensive countries in the euro zone in which to take out a home loan.
It is the fourth month in a row that Irish mortgage rates have fallen. However, it remains substantially above the euro zone average of 2.08 per cent, a figure that is the highest in five years, according to Bonkers.ie. The swing between Irish rates and the euro zone average is close to a full percentage point over the past year.
Ireland was one of only three euro zones states to see mortgage rates fall in July, with Greece and Malta being the others. Rates rose in all other member countries.
“Rates in Germany (at 2.87 per cent) are now higher than they are in Ireland, which no one would have predicted a few months ago,” said Daragh Casidy, head of communications at price comparison website Bonkers.ie. “It seems we finally have European-level mortgage rates – just not in the way we had hoped for,” he added in reference to the ongoing increase in ECB interest rates.
France had the lowest average mortgage rate in the euro zone in July at 1.45 per cent, followed by Austria at 1.79 per cent.
Figures from the Central Bank show that the average interest rate on new fixed rate mortgage loans – which accounted for over 88 per cent of all mortgages in July – was 2.5 per cent, down from 2.62 per cent in the same month last year and from 2.52 per cent in June.
On new variable rate loans, the annual fall was slightly more dramatic, at 0.15 of a percentage point to 3.6 per cent. The bank said the increased popularity of fixed rate loans means that variable mortgage interest rates tend to be more volatile.
The Central Bank said new mortgage loan agreements in July came to €840 million, 17 per cent ahead of the same month in 2021 and also up on June.
Rachel McGovern, director of financial services at Brokers Ireland, said time was running out for homebuyers and owners to lock in rates before the banks move to raise rates in response to the 1.25 percentage point increase in ECB rates since July, with further increases from the ECB clearly signalled.
Most Irish lenders have yet to act on the ECB rate rises, but AIB chief executive Colin Hunt told an Oireachtas committee on Wednesday that it would consider its response to the latest ECB move “over the course of the next number of weeks”.
“Current rates, even though ahead of the euro zone average, are the lowest we’ve seen, and can now be locked in for longer periods of up to 25 years and longer, depending on the lender,” Ms McGovern said. “Some lenders have already moved to increase these long-term fixed rates, and time may be running out on the best deals.”
Outside of mortgages, the average rate on personal loans was 7.07 per cent, with the volume of consumer lending in July up 5 per cent year-on-year at €204 million.
On the other side of the equation, savings interest rates remain anaemic. Although the gap is not as wide as on the lending side, the average interest rates on new term deposits in July was 0.11 per cent in Ireland compared to an average of 0.38 per cent across the euro zone.
