Mortgage rates in Ireland were the second highest in the eurozone and far in excess of the area average of 1.76% in May despite falling seven basis points to 2.73%, according to the latest figures from the Central Bank.
The weighted average interest rate on a new fixed-rate mortgage, which accounted for 83% of all new mortgages in May, was 2.55%, a fall of nine basis points year-on-year and four basis points from April.
The average rate for a new variable rate mortgage rose 11 points to 3.66% though, while the total volume of new mortgage agreements was €695m for the month, an increase of 21% from May 2021 and 15% from April.
"These figures show the peculiarities of the Irish mortgage market. Rates here have been wildly out of kilter with the rest of the Eurozone for years. That continues - but this time it’s more positive. As rates have been increasing significantly in some countries over the past few months they’ve largely been static here," said Darragh Cassidy, head of communications at Bonkers.ie.
“For example rates have almost doubled in Germany over the past year or so while in Ireland they’ve reduced slightly. Unfortunately for homeowners the ECB has signalled that it will start raising rates later this month but we don’t really know by how much.
In Association with
"However Irish mortgage rates are so out of kilter with the ECB base rate that we could see a small increase in the ECB rate not being passed on to consumers. It’ll somewhat depend on the competitive pressures the banks feel under.
"On this point, it was encouraging to hear the CEO of Permanent TSB say last month that he feels the bank as well as the other Irish retail banks have the capacity to absorb the initial round of ECB rate hikes. "
“However, tracker customers are likely to see an almost immediate increase in their repayments. Anyone on a tracker needs to get expert advice to assess their options – depending on how high rates go, moving off a tracker and onto a fixed rate may be the best or worst financial decision someone makes.
“Non-bank lenders which rely almost entirely on wholesale markets for raising funds will be under the most pressure to raise rates. Indeed Avant Money, ICS Mortgages and Finance Ireland all recently have.”
Trevor Grant, chair of the Association of Irish Mortgage Advisors, commented: "The ECB rate increase at the end of the month has been well-flagged and thankfully, has prompted mortgage holders throughout the country to move, in their thousands, to switch to, in most cases, a low-cost flexible, fixed rate.
"In the midst of all the uncertainty around inflation and a housing crisis, people are looking for security wherever they can find it – and fixed rate mortgage contracts offer this.
"One positive to emerge of late is that the switching movement in this country has taken hold like never before, which is in the best interests of the individual mortgage holder, and the market overall as it pushes providers to be more competitive in their offerings”.
The Central Bank said that a further €337m worth of mortgages were renegotiated at an average rate of 2.89%, up from 2.59% the previous month. Elsewhere, the average interest rate on €198m in new consumer loans taken out in May, an increase of 30% year-on-year, was 7.38%.
Loans offered by non-financial corporations (NFC) totalled €1.05bn in May, up 11% from a year prior, and included €115m in loans worth up to €250,000, €75m in loans between €250,000 and €1m, and €860m in loans of over €1m.
The weighted average interest rate on loans of up to €250,000 from non-bank lenders was 4.47%, well ahead of the eurozone average of 1.98%; rising to 2.7%on loans of €250,000 to €1m (1.6% in eurozone), and 3.06% of loans of over €1m (1.31%).
Non-finance corporate overdrafts more than doubled year-on-year (+137%) to just under €5.5bn, with a weighted average interest rate of 3.65%.
Interest rates on new household term deposits stood at 0.03% in May. The equivalent euro area rate was 0.25%. Interest rates on new NFC term deposits in Ireland stood at -0.13% in May, compared to -0.24& in the eurozone.
(Pic: Getty Images)
