There was a slight dip in mortgage rates again in November ahead of expected ECB rate cuts later in the year.
New figures from the Central Bank of Ireland (CBI) show Irish mortgage rates fell slightly in November for the second month in a row.
The average interest rate on a new mortgage in November was 4.25%, down slightly from the 4.27% rate recorded in October and the 4.30% rate recorded in September.
This meant Ireland had the tenth lowest rates in the Eurozone, just above the Eurozone average of 4.13%.
However rates varied hugely across the currency bloc from as low as 1.93% in Malta to as high as 6.26% in Latvia.
For many years Irish mortgage rates were among the highest in all of Europe but they've become much more competitive over the past 18 months.
Why did rates fall?
Even though the average mortgage rate has fallen for two months in a row, no lender has actually decreased its rates over the past few months apart from PTSB, which cut one of its main rates in December, after the period the latest CBI report covers
So why did the average rate fall?
The drop can potentially be explained by two things.
First-time buyers and movers might be choosing shorter-term fixed rates. And these tend to be lower than longer-term rates. This would make sense as it looks like the European Central Bank (ECB) might start to cut rates over the coming months so mortgage holders may not want to lock themselves into a particular rate for too long.
Continued property price growth also means first-time buyer mortgages are getting bigger and bigger. Recent figures from the BPFI show that the average loan amount is now almost €300,000. This means more and more homebuyers would be eligible for a so-called ‘high-value’ mortgage with some lenders. And these have lower rates too.
What's in store for 2024?
In the short term it's possible mortgage rates might increase a bit more over the coming weeks. Indeed PTSB’s variable rates will all go up from next week. And it's possible AIB, Avant Money and Bank of Ireland in particular could also increase some of their rates again too.
However it does look like Irish mortgage rates will end up peaking at a lower level than many would have forecast.
The ECB has hiked its rates by 4.50 percentage points since July 2022. However mortgage rates with the main lenders here have only gone up by around 1.50 to 2 percentage points on average so far. The exception being tracker customers. Of course it has to be remembered that rates here were very high to begin with. But it does illustrate how little of the ECB rate hikes have been passed on.
At some stage later this year it's highly likely the ECB will cut rates as a flagging Eurozone economy and falling inflation put pressure on it to do something. But when, and by how much, is the big question.
Markets seem convinced the ECB will start to cut rates as soon as March or April, and by around 1.5 percentage points in total in 2024. However the ECB itself has been pushing back on this assumption and it may not start to cut rates until much later in the year.
Either way, it's unlikely the main banks will immediately lower their own rates in response given how little of the ECB increases they've passed on. The exception again is tracker customers who'll benefit automatically from any rate cuts. But for other mortgage holders it could be a while yet before you see rates fall.
Here's a look at the average mortgage rate in select Eurozone countries.
|Average mortgage rate Nov 23