Irish mortgage rates have risen for the third consecutive month to reach their highest level since August 2017.
Ireland now has the sixth-highest average mortgage interest rate in the EU, according to the latest data from the Central Bank.
The data shows that the weighted average interest rate on a new home loan rose two basis points to 4.31 per cent at the end of March. That’s 0.77 percentage points higher than at the same point one year ago, and also represents the third consecutive monthly increase.
It comes as the average rate on a home loan in the euro area dropped eight basis points to 3.84 per cent during the same period.
In a statement, Daragh Cassidy of price comparison website Bonkers.ie said that Irish mortgage rates “are now at their highest level since at least August 2017.”
In addition, he said that: “The gap between Irish and euro zone rates is now at its widest level since July 2022.”
“The gap between the average rate in Ireland and the eurozone continues to widen. However, this hopefully marks the peak of mortgage rates in Ireland for now,” Mr Cassidy, head of communications at the website said.
“We’ve seen interest rate cut expectations scaled back quite dramatically in the US and Australia for example. But at present it still seems highly likely that the ECB will cut rates at least more than once this year,” Mr Cassidy added.
It comes as lenders in the retail market in Ireland, who have received the benefit of a campaign of interest rate hikes introduced by the European Central Bank (ECB) may face the prospect of increased pressure to offer more attractive rates in upcoming months amid competition and customers shopping around.
It comes as the Spanish bank, Bankiter, announced last month that it was applying for a full Irish banking licence and entering the deposit market as part of its strategy to diversify. The recent move from Spain’s fifth largest bank has been touted as a significant boost for competition here, where retail banking has long been dominated by three Irish lenders – AIB, Bank of Ireland, and Permanent TSB.
It also comes as the European Central Bank (ECB) looks set to press ahead with interest rate cuts, having promised a rate cut on 6th June. The data is likely to exert pressure on Irish banks to cut mortgage rates as soon as the ECB starts reducing its main interest rates.
Pointing to cuts made by ESB, PTSB and BOI in recent weeks, Mr Cassidy said current figures may represent a peak for mortgage rates.
“These lower rates should feed through into the figures over the coming weeks. Avant Money has also cut its rates. However the lender isn’t included by the Central Bank in the data at present,” he said. “It still seems highly likely that the ECB will cut rates at least more than once this year.”
“Regardless of how quickly or by how much rates fall this year, the tens of thousands of mortgage holders on fixed rates which are due to come to an end over the next few months still need to be preparing for potentially higher repayments,” Mr Cassidy cautioned.
According to the Banking & Payments Federation Ireland (BPFI) the average first-time buyer loan is around €270,000.
Statistics show that the average mortgage loan amount for first time buyers in Ireland increased by around €20,000 in 2022, and that since 2017, the average loan size has grown year-on-year.
In 2022, Irish first-time homebuyers took out mortgage loans averaging 269,000 euros, while in 2017, that figure stood out at about 211,000 euros.