Mortgage rates fall below euro area average for first time
Irish mortgage rates are falling even as rates elsewhere in the eurozone continue to rise, new figures show.
The average Irish rate fell marginally by 0.01% to 2.57%, while the average rate in the euro area went up by 0.25% to 2.65%.
It means that, at the end of October, the rate in Ireland moved below the euro area average for the first time and is now ranked 15th in the list.
Just five months earlier, Ireland had the second-highest rates at 2.68%. The European Central Bank (ECB) began raising rates at the end of July to try to curb runaway inflation, hiking them from 0% to 0.5%.
There have been two 0.75% increases since, raising the rate to 2%, with a further 0.5% increase expected last night.
But while other eurozone banks raised their rates in line with the ECB increases, Irish banks have not passed on the full hike.
The Central Bank’s latest retail Interest rates report on Wednesday said: ‘The weighted average interest rate on new Irish mortgage agreements at the end of October decreased by one basis point to 2.57% from September.
‘In the same period, the equivalent euro area average rose by 25 basis points to 2.65%. As at end-October, the rate in Ireland moved below the euro area average for the first time since this series began in 2017.’
However, ‘the phenomenon could be short-lived’, according to rachel McGovern, director of Financial Services at Brokers Ireland.
She said: ‘We are fully into a period of interest rate rises, with the ECB expected to raise its rate by most likely 0.5%, which will add approximately €50 per month on a €200,000 mortgage over a 25-year term.
‘No one knows how long this will last and where such rises will end. The main thing mortgage holders and those aspiring to get a mortgage need to do is to concentrate on getting the best interest rate they can secure, especially while there are still reasonable rates available in the market.’
A homeowner with a 25-year €250,000 mortgage at the average rate of 2.57% would be paying €1,127 a month compared to €1,136 at the euro area average rate of 2.65%, a monthly saving of €9.
The extent to which the Irish rates have flipped is seen when comparing repayments now to those in May.
An Irish borrower then would have been paying €1,146 a month at a rate of 2.73%, compared to just €1,029 at the average eurozone rate of 1.76%, which was €117 more.
However, Ms McGovern said that increasingly what is on offer from Irish lenders is changing in the wrong way from the point of view of borrowers, as lenders begin to pull back on some of the better long-term fixed rates.
Only Avant Money is offering a fixed-rate loan for a period longer than ten years.
MyMortgages.ie chief Joey Sheahan said: ‘We cannot stress enough the urgency of switching for thousands of mortgage holders throughout the country. You could save a six-figure sum by switching to a cheaper lender, depending on the size of your home loan and how expensive your mortgage interest rate is.’
The average house price now is €352,000 up from €335,000 a year ago, according to the latest CSO figures.
The European Central Bank expects inflation to remain above its 2% target for the next three years, signalling that its fight against runaway prices is far from over.
The ECB is certain to raise interest rates for a fourth consecutive time today to rein in inflation, and will also announce new quarterly economic projections, used by investors to work out how many more hikes to expect.
Driven by factors ranging from Russia’s invasion of Ukraine to the impact of pandemic-era stimulus, inflation across the 19 countries that use the euro reached 10.6% in October before falling back last month. The new projections will put inflation comfortably above 2% in 2024 and just above it in 2025, a source said.