First time buyer with €250k mortgage paying extra €190 a month compared to EU average

By Pádraig Hoare

The Government “needs to show its teeth” and call banks to task on mortgage rates, which remain among the highest in the eurozone, according to a consumer body.

The average interest rate issued on a new mortgage in July was 3.21%, which fell very slightly from June, according to the latest Central Bank figures.

The financial watchdog said that the 3.21% rate compares to an average rate of just 1.77% across Europe.

Generic image of couple surveying bills

This means a typical first-time buyer who’s borrowing €250,000 over 30 years will pay an extra €190 a month, consumer comparison website Bonkers.ie said.

Daragh Cassidy of Bonkers said: “Despite the recent rate reductions from some of the main banks, Irish mortgage holders continue to pay more for their mortgage than any other country in the eurozone, which is incredibly frustrating.

“With some of the banks still in majority State ownership, the Government needs to show its teeth and call the banks to account on this.”

Mr Cassidy said that a first-time buyer who takes out a mortgage of €250,000 in Ireland over 30 years would pay around €1,085 a month based on average rates.

“In Europe, they would pay on average just over €895. So in Ireland, we’re paying an extra €190 a month to the banks — or over €68,000 extra over the lifetime of the mortgage.”

The Central Bank said there was a 34% year-on-year increase in new mortgage agreements in the 12 months to July 2018, with the volume of new mortgage agreements amounting to €864m, bringing total new agreements to €7.7bn over the past 12 months.

Fixed rate mortgages accounted for 63% of new agreements over the three months to July, compared with 80% over the same period in the eurozone, it added. The average fixed rate for the year to date stands at 3.11%, according to the Central Bank.

Mr Cassidy said it was time for mortgage holders on variable rates to look into their options.

“We’ve seen fixed rates become more and more popular over the past few years and this shows no signs of slowing down, which is unsurprising given the better value on offer at the moment with fixed rates.

“Some fixed rates in the market are as low as 2.3% now, which is well below any variable rate on offer for new customers.

“With interest rates due to finally rise sometime in the middle of next year, mortgage holders on a variable rate would be wise to consider their options and look into the certainty and value that fixed rates currently offer.”

Brokers Ireland said while the increase in lending was welcome, there is no rationale as to why Irish mortgage holders should be paying the highest rate across the EU.

Director of financial services at the organisation, Rachel McGovern, said there was “no solid reason” as to why Irish mortgage holders “should not enjoy the same good value fixed long-term interest rates as their Euro area counterparts”.

She said mortgages are long-term products which lenders can plan long-term funding to support.

“Whilst of late Irish lenders have been improving their fixed rate mortgage products, Irish mortgage holders can fix for a maximum of 10 years while many of their European counterparts can fix for the entire term of the mortgage.”

More on this and other business news in tomorrow's Irish Examiner


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