Irish mortgage rates are now the highest in the Eurozone - RTE's Drivetime

Image Irish mortgage rates are now the highest in the Eurozone - RTE's Drivetime

Mortgages are a very hot topic in Ireland nowadays and it may come as no surprise that Ireland has reclaimed the top spot for the highest mortgage rate in the EU. Figures released by the Central Bank revealed that the average rate in Ireland is 2.73%, which compares to the Eurozone average of 1.28%.

Head of Communications at bonkers.ie, Daragh Cassidy, appeared on RTE’s Drivetime to discuss why mortgage rates in Ireland are so high and what lenders are offering the lowest rates.

Here’s an outline of the main points discussed by Daragh in the interview.

How does Ireland’s mortgage rate compare to other European countries?

There’s quite a large variation in rates among all of the European countries, which might surprise some people as we are all in the same currency zone after all. 

Ireland is leading the pack, which is no surprise, at 2.73%. Next is Greece at 2.58% and in third is Latvia at 2.54%. 

The Eurozone average is 1.28% but there are countries with an average rate below that. Finland has the cheapest rate at 0.71% and then Portugal follows closely with a rate of 0.8%.

How much extra are people in Ireland paying?

It would make quite a difference to Irish mortgage holders, particularly if you’re borrowing €200,000 - 300,000 over such a long period.

To give an example, according to the Banking and Payments Federation Ireland the average first-time buyer mortgage in Ireland is now around €250,000. If you were to borrow that amount over 30 years, you’d be paying an extra €181 per month or so compared to the EU average. This works out as around €2,200 a year. 

Why are mortgage rates so high in Ireland?

There are two main reasons why rates are so high in Ireland.

  1. There’s still a lack of competition in the Irish mortgage market. It remains heavily concentrated in the hands of a few lenders, namely Bank of Ireland, AIB and to a lesser extent, Permanent TSB. Competition has improved in recent times, particularly with the arrival of Avant Money, it’s still below where it needs to be. KBC and Ulster Bank are planning to leave the Irish market soon too, which won’t help at all.
  2. Mortgage lending in Ireland is considered risky. Partly because banks here have a huge amount of difficulty enforcing security if a loan goes into arrears. It’s very difficult here to repossess a house even if someone hasn’t paid their mortgage in a very long time. As a result, Irish banks have to hold around three times the level of capital to safeguard against potential loan losses compared to banks in the rest of Europe. 

Irish banks say this is the main reason why mortgage rates are so high. Some of the newer lenders, such as Spanish-owned Avant Money, don’t have to hold as much capital and they’re the ones offering the lowest rates in the Irish market. 

You can learn more about why mortgage rates in Ireland are so high here in this blog post.

Why can’t Irish people get a mortgage in another country?

We don’t yet have a true single market for services in the EU. We do have one for goods, but not services and we won’t for a long time.

The other issue is around enforcing security. A French or Finish bank, for example, wouldn’t have jurisdiction to remove an Irish customer who wasn’t paying their mortgage, so they’re not going to lend to someone buying a house here.

Who has the lowest rate in Ireland?

Despite some banks planning to exit the Irish market, it’s still worthwhile shopping around. There’s quite a variety of interest rates on offer within Ireland.

There are rates on offer here of 1.95% from Avant Money and ICS Mortgages, which is a little closer to the Eurozone average. Finance Ireland also has some very good rates at the moment too.

Many people might not be familiar with these smaller lenders and people tend to gravitate towards the bigger lenders, but we would advise you to compare the whole market and not to be afraid to go with lesser-known lenders.

You can always chat to a broker, such as us at bonkers.ie, who can steer you in the right direction.

Do those lenders have specific requirements in place that borrowers must meet?

There are some catches to the lower rates in Ireland. For that 1.95% rate from Avant Money, you do need a 40% deposit and that’s going to be beyond the capabilities of first-time buyers and maybe even switchers.

However more widely available rates of about 2.2% are on offer to people who may only have a 10% deposit.

If you’re buying a very energy efficient house with a BER rating of B1, you could get a rate of 2.1-2.15%.

Start your mortgage journey with bonkers.ie

Whether you’re a first-time buyer, home mover or switcher, you can easily compare interest rates, offers and cashback incentives from all Ireland's lenders using our mortgage calculator.

And when it’s time to apply for your mortgage, you can submit an online enquiry through our new mortgage broker service and one of our experienced financial advisors will call you back to get your application started.

You’ll be happy to hear that our mortgage broker service is entirely free and is fully digital from start to finish, meaning everything can be carried out online from the comfort of your home. And it's completely paper-free too!

If you want to know more about mortgages, check out the following articles:

Let’s hear from you

Are you surprised that we have the highest mortgage rate in Europe? Would you consider switching mortgages? 

If you have any questions on mortgage rates, we’d be happy to help. Feel free to contact us on social media. We’re on Facebook, Twitter and Instagram.