The weighted average interest rate on new variable rate mortgages rose 17 basis points in August and 46bps year-on-year to 3.77%, the Central Bank has said
Overall, the average interest rate on new Irish mortgages rose 1bps in August to 2.64%, which is 43bps higher than the eurozone average of 2.21%.
The average interest rate on new fixed-rate mortgages in Ireland, accounting for 88% of all mortgages agreed in August, was 2.49% -- up 1bps from July and down 13bps annually.
The Central Bank said the shift away from variable to fixed-rate mortgages in recent years had resulted in higher volatility in variable rates, and the sudden increase follows the European Central Bank's decision to increase interest rates 75bps to 1.25% last month.
The ECB previously announced its first increase in rates in 11 years in July, raising rates by 50bps or 0.5 percentage points.
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“We have not yet seen the full impact of the ECB rate rises on mortgage holders in the country," said Joey Sheahan, head of credit at MyMortgages.ie and author of The Mortgage Coach.
"However, in recent weeks some lenders have announced increases to their new business rates, while other lenders have said that their rates are 'under review'. Unfortunately, there could well be higher rates for already–strapped mortgage holders coming down the tracks.
"It’s difficult to predict how high interest rates could go – economic views seem to change each day, with some suggesting the ECB could push up rates another 1-2% in the next 12 months, while others suggest that an impending Euro recession could mitigate against further interest rate increases. Either way, it’s difficult to see rates returning to the levels they were at early in the year."
Trevor Grant, chair of the Association of Irish Mortgage Advisors (AIMA) said that Finance Ireland had extended the notice period timeframe in which new applicants could avail of their cheaper lower rates, but that further increases are "on the way".
"We expect that these could negatively impact borrower affordability, which means applicants will need to consider the various deals offered by all lenders to ensure that they get mortgage approval on the amounts they need to buy their home," he added.
New mortgages valued at a total of €937 were agreed in August, an increase of 33% yer-on-year, and further €437m worth of mortgages, of which 91% concerned fixed-rate agreements, were renegotiated, down from €700m in July.
The weighted average interest rate for all renegotiated mortgages was 2.84% in August, up from 2.76% in July.
Elsewhere, the average interest rate on new consumer loans stood at 7.36% in August, and the volume of new consumer lending reached €194m, an annual increase of 24% but down 5% from July.
Total new non-financial corporation (NFC) loan agreements increased 50% year-on-year to €1.638bn, including €237m (or 14% of all new NFC lending) in loans of up to €250,000 and €141m (9%) in loans of between €250,000 and €1m.
Some €1.259bn was lent in loans of over €1m, a decline of 14% from July and an increase of 41% from August 2021. The weighted average interest rate on this instrument category stood at 2.88% in August compared to 1.67% in the eurozone.
NFC overdrafts in August were higher in year-on-year (108%) and month-on-month terms (26%), at close to €8bn. The weighted average interest rate equalled 2.83%.
Interest rates on new household term deposits stood at 0.06% in August. The equivalent euro area rate was 0.48%, and interest rates on new NFC term deposits in Ireland stood at 0.09% in August compared to 0.2% in the eurozone.
(Pic: Getty Images)
