Competition concerns persist as Ireland back to having highest mortgage interest rates in eurozone

For someone borrowing €250,000 over 30 years in Ireland, they pay over €181 extra a month, or almost €2,200 a year, compared to people elsewhere in the eurozone.

Ireland has reclaimed the unwanted title of having the highest mortgage interest rates in the eurozone, despite a widening of competition in the domestic lending market.

Having trailed only Greece’s high homeloan repayment rates in recent months, latest Central Bank figures show Irish mortgage rates, once again, are the highest among the 19 countries sharing the euro.

While, average Irish mortgage rates hit their lowest in around four years last month – falling by 0.09% in August – the overall average interest rate on a new mortgage stood at 2.73%. That is more than double the eurozone average of 1.28%.

Greece and Latvia have the next highest eurozone mortgage rates to Ireland – at 2.58% and 2.54% respectively.

In all, only five countries currently charge higher mortgage interest rates than the eurozone average. The Netherlands is charging 1.62% at present, while the average repayment rate on a new mortgage in Spain currently sits at 1.43%.

Portugal and Finland charge the lowest mortgage rates, at just 0.8% and 0.71% respectively.

According to the Banking and Payments Federation, the average first-time buyer mortgage in Ireland is around €250,000. This means someone borrowing this amount over 30 years is paying over €181 extra a month, or almost €2,200 a year, compared to people elsewhere in the eurozone.

Industry commentators say the effect of new competition in the market – despite the shrinkage of providers due from the pending exits of Ulster Bank and KBC Bank Ireland – is not yet being seen in average rates charged to consumers.

"Despite the impending exits of both Ulster Bank and KBC, there has actually been some good competition in the mortgage market in recent months with ICS Mortgages, EBS, Finance Ireland and Avant Money all reducing rates. However, this isn’t feeding through to the average rate consumers are being charged just yet," said Daragh Cassidy of Bonkers.ie.

"This is partly because many of the lowest rates in Ireland right now come with big caveats - such as a 40% deposit - or are only available on B+ energy rated homes - something which is clearly beyond the capabilities of many first-time buyers. Even movers. Also, AIB, Bank of Ireland and Permanent TSB, which between them have around 70% of the mortgage market, charge among the highest rates," he said.

The main banks put this down to them having to hold around three times the level of capital to safeguard against potential loan losses compared to banks in the rest of Europe.

“The fall in mortgage rates over the past year is obviously welcome and the overall trend does appear to be downward, albeit very, very slowly. However, it’s still deeply frustrating that rates here remain so high compared to our eurozone neighbours and have done so for so long," Mr Cassidy said.

Brokers Ireland said increased competition is leading to more secure mortgage products. It said what everyone needs now is for the Government’s Housing for All plan to work in delivering more homes as quickly as possible to satisfy pent-up demand and to ensure stability in house prices.