The average interest rate on new Irish mortgages rose marginally to 4.06 per cent in July, according to data published by the Central Bank of Ireland. The figures come on the eve of the European Central Bank’s latest meeting on interest rates, which will be held in Frankfurt on Thursday.

The increase in July was just two basis points (0.02 per cent) on June but compared with an average of 2.63 per cent a year earlier.

At the end of July, the rate in the Republic exceeded the euro area average by 20 basis points, with the equivalent euro area average rising by 8 basis points to 3.86 per cent.

Fixed rate home loans accounted for 85 per cent of new mortgage agreements in July, with the weighted average interest rate on these being 4.04 per cent. This was up just two basis points on the month and compared with a rate of 2.5 per cent a year earlier.

The Central Bank said €870 million of “pure new mortgage agreements” were concluded in July, a 14 per cent increase on the previous month but down 4 per cent in annual terms.

Renegotiated mortgages totalled €286 million in July (86 per cent with fixed rates), compared to €249 million recorded in June.

Responding to the figures, Rachel McGovern, director of financial services at Brokers Ireland, said there was a lack of competition in the Irish mortgage market.

“In Ireland, we don’t have fixed rates for the full term of the loan, which many other countries do, and the very best ones we did have which only came on stream in recent years for periods of 20 and in some cases 30 years, have been withdrawn,” she said.

She said these “good value” mortgages came on to the market at a time when consumers were acclimatised to historically low interest rates, with most taking out a fixed loan for short terms of about three years.

“They were unprepared for the seismic shift that has taken place in the last year and will now be coming out of their fixes facing much higher rates they just didn’t anticipate,” Ms McGovern added.

Joey Sheahan, head of credit at online brokers MyMortgages.ie, noted that since the ECB started to raise its rates in July 2022, existing tracker mortgage holders have seen their repayments increase by €461 monthly or €5,532 annually, based on a €220,000 mortgage with 15 years remaining.

“Higher interest rates have also restricted how much house-hunters can borrow as the amount of demonstrated repayment capacity banks want to see has increased by as much as €600 monthly for a €300,000 mortgage, meaning banks want to see mortgage applicants save a whole lot more each month,” he said.

“We have seen a marked upswing in mortgage switchers in the past month or so as many borrowers’ fixed rate terms are now ending and there is a large disparity between bank rates, with some charging as little as 3.65 per cent on a green rate and other in excess of 6 per cent.”