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Mortgages

Latest Central Bank figures show that the Irish mortgage rate ripoff continues

Daragh Cassidy

Daragh Cassidy

Head of Communications

Latest figures from the Central Bank show that Irish mortgage customers continue to pay way higher interest rates than customers in any other country in the Eurozone. So why are we paying so much and what can be done?  

According to the Central Bank, the average interest rate on a new mortgage in Ireland is 3.15%. Although low for Ireland by historical standards, and a drop from 3.21% in July, this compares to an average rate of 1.77% across the Eurozone and a rate of just 0.80% in Finland - a country with a similar population to Ireland.

What this means is that a first-time buyer who takes out a mortgage of €250,000 in Ireland over 30 years would pay €1,074 a month based on average rates. In Europe they would pay on average €895.

This means first-time buyers in Ireland are paying an extra €179 a month to the banks (or over €64,000 extra over the lifetime of the loan).

Ireland monthly repayment Eurozone monthly repayment Finland monthly repayment
€1,074.34 (3.15% average interest rate) €895.56 (1.77% average interest rate) €781.34 (0.8% average interest rate)

The figures also show that the popularity of fixed rates continues to rise and these now account for 65% of new mortgage lending. However, this is still low by European standards where over 80% of mortgages are fixed.

Why are mortgage rates in Ireland so high?

There is still a lack of competition in the Irish mortgage market as it remains heavily concentrated in the hands of a few main banks; mainly AIB, Bank of Ireland, and to a lesser extent Ulster Bank. And although competition in the market has heated up in recent times, it's still below where it should be and this has lead to higher rates.

Irish banks also have a large number of tracker mortgages on their books. These ultra low-rate mortgages make little, if any money for the banks, so they’re recouping their losses by charging new customers much higher rates.   

Finally, the level of home repossessions in Ireland is incredibly low by international standards. In most European countries a bank will take back ownership of a property within the space of a year if the loan has gone bad and isn't being repaid. This isn't the case in Ireland where the number of repossessions, even in cases where the mortgage hasn't been repaid in years, remains negligible due to the legal impediments faced by banks and more generally the length of the legal process involved.

And while some people might feel that this is right approach to take towards people who get into financial difficulty, it does mean mortgage lending is far riskier in Ireland than in other European countries and therefore the interest we're charged is higher.  

What can people do to combat high rates?

If you’re a first-time buyer who’s at the start of the mortgage journey, make sure you do your research and shop around. Remember that you don’t have to be an existing customer with a particular bank to get a mortgage off them.

There’s now a huge variation in interest rates and cashback incentives across all the different lenders so find out who’s offering the best deal for you.

If you already have a mortgage, then look into switching. In recent times Irish mortgage holders have been reluctant to switch, which is crazy given the potential savings involved.

Many lenders now have dedicated switch teams in place to make the process as easy as possible so it often won’t be as much hassle as you think it might. And while there are costs associated with switching mortgage provider, in some cases banks will provide a cashback incentive to those who switch or a contribution towards the legal fees. 

To see exactly how much you could save by switching, check out our handy mortgage calculator. 

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