Irish mortgage rates are ending another year as the most elevated in Europe and are likely to remain so without Government or Central Bank action as the era of cheap money draws to an end.
The latest figures from the Central Bank show borrowers for new home loans were charged an average of just over 3%, compared with an average rate of 1.77% across the eurozone as a whole, while homeowners were charged 2.72% for renegotiated mortgages.
Lenders charged an average rate of 3.3% for new variable rate mortgages over the first 10 months of the year and a rate of 3.03% for new leading on fixed-terms over the same period.
And there was some bad news for SMEs, as the cost of companies borrowing less than €1m rose sharply by over 25 basis points, to an average of 4.64%, the figures show.
Much bigger companies appear to continue to borrow at significantly lower rates; new corporate loans of over €1m cost around 1.9%.
The high cost of lending in Ireland for both households and SMEs has long been under the spotlight by advocates for consumers, household debt advisers, and business groups.
ECB head Mario Draghi confirmed this week that the central bank is ending its bond-buying programme that had ensured interest rates in the eurozone remained at record lows. Low-interest rates had headed off the risks of deflation and tepid economic growth as Europe emerged from the debt crisis.
How quickly the ECB will act to hike official interest rates that would send Irish and corporate borrowing costs higher is a matter of great debate, with some market participants betting that slowing eurozone growth will delay any official hike into 2020.
Nonetheless, Irish mortgage borrowers, including tracker mortgage borrowers, and SMEs face the probability of higher costs in the coming years on what are already the costliest loans in the eurozone.
ECB policymaker hawk Ewald Nowotny, who heads the Austrian central bank, said the ECB should hike its key interest rate as soon as possible.
His comments laid bare diverging views at the ECB, where some policymakers want an even more cautious approach.
On mortgage lending, the Irish Central Bank figures confirmed that €7.6bn in new home loans were agreed in the 12 months through the end of October.
Meanwhile, Irish banks continue to pay zero or negligible rates to household savers and deposits from companies.
The Central Bank said new household deposits were paid 0.04%, that’s down from a year earlier, and compares with a rate of 0.33% paid across the eurozone.