Fixed rate home loans on the rise

The high costs banks charge for their variable rate mortgages are driving home buyers to choose fixed rate home loans, Central Bank figures suggest.

The figures show demand by first-time and existing homeowners was behind a net increase of €2.3 billion in fixed-rate home loans in 2015.

Floating rate, or variable, home loans for homeowners and buy-to-let landlords fell by €4.3bn in the year, according to the bank’s bulletin on personal credit and deposits trends.

“These developments are reflective of the current interest rate environment where fixed-rate mortgages have increasingly favourable rates,” the Central Bank said.

Consumer advocates and opposition parties have said the costs of mortgages here are far too high and do not reflect the cheap or zero cost of funds available to lenders in the eurozone.

The banks in the past said regulatory factors such as the relative difficulties facing banks in repossessing properties explain the difference between interest rates here and the rest of the eurozone.

Finance Minister Michael Noonan pledged last summer to persuade lenders to lower their mortgage rates and called in the chiefs of the banks in a series of meetings. Most banks responded by cutting their fixed-rate home loans.

As recently as last week, the ECB cut its main refinancing rate to zero — which theoretically in the currency union should go some way to drive down the retail costs of borrowing for all customers.

There was a small increase in the fourth quarter in loans for home buyers — for the first time since the Central Bank first started collecting the data in 2011.