New mortgage interest rates drop ahead of European Central Bank meeting later this month

Sharp increase in energy prices could prompt ECB to hike interest rates when it meets later this month

ECB president Christine Lagarde is due to meet with the rest of the bank's Governing Council at the end of the month to discuss interest rates. 

The average mortgage interest rate declined slightly in the year to the end of February to 3.51%, but increasing energy prices due to the conflict in the Middle East could force the European Central Bank (ECB) to hike rates once again when it meets at the end of this month.

According to new data from the Central Bank of Ireland, the weighted average interest rate on new Irish mortgage agreements at end-February 2026 was 3.51%, down 28 basis points annually. The average rate across the eurozone stood at 3.41%.

The weighted average rate in Ireland exceeded the eurozone average by 10 basis points, the smallest difference since November 2023. Ireland has the seventh highest average mortgage interest rate in the eurozone.

The total volume of pure new mortgage agreements increased to €792m in February, an increase of €13m compared to February last year. Renegotiated mortgages totalled €484m in February, an increase of €168m year-on-year.

Chairperson of Irish Mortgage Advisors Trevor Grant said it was “notable” the gap between Irish mortgage rates and the euro area average had continued to narrow to just 10 basis points which “shows that competition among Irish lenders is helping domestic rates move more in line with the broader eurozone”.

“Borrowers need to be mindful this data is recorded from a time before the start of the conflict in the Middle East,” Mr Grant added.

The outcome of the temporary ceasefire just announced is far from certain, and a possible prolonged war and the economic fallout of geopolitical tensions  could put upward pressure on eurozone inflation, which in turn may prompt the ECB to increase interest rates sooner than expected.

“Many homeowners could find themselves facing a combination of higher mortgage repayments and rising day-to-day costs, particularly energy bills,” he said.

When it comes to new consumer loans, interest rates declined by 40 basis points over the 12 months to 6.89%. The total volume of new consumer loans was €309m in February.

In terms of household overnight deposits, the weighted average rate remained mostly flat at 0.14%, while the average interest rate on new household deposits with agreed maturity saw a 49 basis point fall to 1.84% in February compared to last year.

The level of new business in this category was €1.5bn, 2% higher than in January and 16% higher than in February 2025.

Early on Wednesday morning, US president Donald Trump announced a two-week ceasefire in the US’s conflict with Iran, which resulted in a drop in the cost of oil. However, damage to oil and gas infrastructure across the Middle East, resulting from the war means getting supplies back up to pre-war levels will take a prolonged period of time.

As a result, energy prices, particularly when it comes to petrol, diesel, and home heating oil, are likely to remain elevated. Additional costs when it comes to electricity prices, due to the increasing price of gas, will take some time to feed through the system.

All of this will likely cause inflation to increase further. The Harmonised Index of Consumer Prices (HICP), a measure of inflation that allows for comparison across EU member states, shows prices increased by 2.5% across the bloc in March compared to last year.

However, Ireland’s HICP rate was much higher, at 3.6%.

The ECB is due to commence a two-day meeting on interest rate policy on April 29.