Bigger mortgages, lower interest rates

Consumers are paying less interest on their mortgages than other Europeans and are also earning more on their deposits.

Newly published retail interest rate data, from the Central Bank, shows the weighted average interest rate being charged on Irish mortgages amounted to 2.98% in February, the latest month for which figures are available.

That average rate was unchanged from January’s level, but is still 0.44% lower than what it was just five months ago. The average Irish mortgage interest rate also remains significantly lower than the eurozone average, which lies at 3.86%. The difference can largely be explained by the large amount of tracker mortgages in the Irish market, which aredirectly affected by ECB rate movements.

In terms of new business, the data shows interest rates on new mortgages fell slightly in February. The average rate on new house loans was 3.09%, down from 3.11% in January. Again, this was lower than the eurozone average, which is 3.44%.

Ciarán Phelan, chief executive of the Irish Brokers’ Association, poured cold water on the data saying it was false to say that mortgages were cheaper in Ireland than elsewhere in Europe.

“The missing factor in this data is that, as a result of the property boom, Irish mortgage holders have far bigger mortgages than their European counterparts. It would be more relevant to contrast the average mortgage repayment in Ireland with that of the eurozone.”

Elsewhere, yesterday’s figures show that interest rates on all outstanding loans to households fell marginally in February to a weighted average of 6.09%, down from a 6.12% average at the end of January.

However, the interest rate on short-term loans for consumption and other purposes, with an agreed maturity of up to one year (this includes overdrafts and credit card debt) was 8.86%, slightly up on the 8.1% average of the previous month.

The latest Central Bank statistics also cover deposit rates. Here, the story is different with interest rates in Ireland continuing to rise in February and rising significantly over the past year.

Irish deposit interest rates are also higher than the European average.

At the end of last year, the weighted average interest rate on all term deposits was 2.78% in Ireland; compared to a European average of 2.46%.

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