Mortgage rates down but still twice Eurozone average

Mortgage rates in this country are more than twice the average in the Eurozone.

Charlie Weston

MORTGAGE rates have fallen in this country but are still more than twice the average charged in the Eurozone.

This means it costs €190 more a month to service a mortgage in this country than the average in the currency bloc.

New figures show that the rate on new mortgage agreements was 2.79pc in February.

This is down by 12 basis points on the same month a year ago, but is still more than twice the 1.27pc average for the euro area.

Ireland is back to having the second highest mortgage interest rates across the euro area, according to the Central Bank data.

Last month this country was at the top of the table for having the most expensive mortgages, but Greece is now the most expensive country for new home loans.

When variable rates are excluded from the calculations, the average new mortgage agreement was 2.65pc in February. Fixed rate mortgages accounted for 82pc of new agreements over the month, the Central Bank said.

There was a 7pc rise in the volume of new mortgage agreements compared with the same month last year, to €617m.

Both AIB and Permanent TSB have cut rates in recent weeks, with Spanish provider Avant Money widening its low-cost mortgage offer to new locations across the State.

The move by Bankinter-owned Avant is expected to put more pressure on other lenders to cut rates.

Avant is already capturing a large chunk of the switcher market with rates as low as 1.95pc.

Permanent TSB launched a four-year fixed rate mortgage for new customers from 2.25pc for those who decide not to take cash back when drawing down their mortgage.

AIB now has a rate of 2.1pc is for the best energy-rated homes, where the loan is less than 50pc of the value of the house.

It also reduced rates to 2.15pc for customers taking out a mortgage of between 50pc and 80pc of the value of the home, compared with 2.35pc previously.

Daragh Cassidy of price comparison site Bonkers.ie said the fall in rates compared to this time last year is welcome, but mortgage rates remain significantly elevated compared to our eurozone counterparts.

“A first-time buyer who takes out a mortgage of €250,000, over 30 years, is paying an extra €190 each month compared to the eurozone average or almost €2,300 a year. It’s hugely frustrating.”

He said the higher rates also limit the amount people can borrow and put home ownership further out of reach.

If rates here were the same as the eurozone average, a buyer could borrow around €300,000 instead of €250,000 for the same monthly repayment.

Lenders here blame tough European regulations on the amount of capital that has to be put aside when mortgages are issued for the high cost of home loans.

Mortgage issuers in Ireland are required to hold about three times more capital for the perceived higher risk in their mortgage loans books when compared with average capital requirements in Europe, according to a report commissioned by the Banking and Payments Federation Ireland.

The report also says the difficulty in repossessing property is another key reason for the high cost of mortgages here.