Irish mortgages among most costly

Irish mortgage holders are continuing to pay higher-than-average interest rates on new home loans despite recent reductions, new research from the Central Bank shows.

The standard variable rate on new lending for owner- occupiers stood at 3.76% at the end of 2015 having fallen from 4.13% in the first quarter of the year.

Despite the decrease, new mortgage loans and restructured arrangements continue to be accompanied by inordinately high interest rates in comparison with other EU countries.

The Central Bank’s Household Credit Market report shows the interest rate on new business loans for home purchases — which also takes account of restructures and mortgage switchers — is higher here than in Spain, Germany, France, and a host of other countries.

Last year, Finance Minister Michael Noonan tried to force banks to cut their variable rates in response to significant public anger towards the cost of home loans here.

Rather than cutting variable rates, however, many lenders unveiled new fixed rate offers in response to the pressure. AIB cut its standard variable rate by 0.25% last August.

The bank’s research also shows that while mortgage arrears are in decline, an increasing share of arrears cases are moving into long-term arrears of 720 days or more. In the fourth quarter of 2015, over €8bn of total arrears was more than 720 days-past-due compared to €3.3bn of arrears between 180 and 720 days.

In the final quarter of last year, 14.7% of the value of all residential mortgage loans were in arrears compared to 21% at the peak of the arrears crisis in 2013.

New mortgage approvals also fell between the fourth quarter of 2014 and the fourth quarter of 2015.

The value of new mortgage approvals fell from €1.5bn to €1.3bn in that time while the number of new loan approvals has also fallen from 8,339 to 7,124, according to figures from the Banking and Payments Federation.

As a whole, Irish households are also among the most indebted in Europe.

Consumers and families are continuing to pay down debt as the economy recovers with household debt falling from €159.5bn to €151.2bn in the year to the third quarter 2015.

Consequently, both the debt-to-income and debt-to-asset ratios are continuing to come down to a more sustainable level.

Much like the standard variable rate situation, however, the country retains an unenviable position among its peers with Irish household debt the third highest in the EU behind just Denmark and the Netherlands.