Ireland's expensive mortgage rates are second highest in eurozone

The average interest rate on new consumer loans was 6.65% in February 2022.

Those looking for homes are under increasing cost pressure as new figures showed Ireland has the second highest mortgage rates in the eurozone.

The weighted average interest rate on new Irish mortgage agreements was 2.76% in February 2022, down three basis points on February 2021, according to the Central Bank. The average for the euro area stood at 1.36% in February.

“Higher mortgage rates add hugely to the cost of living in Ireland, which as we know is already extremely high compared to the rest of Europe. According to Eurostat, Irish housing costs such as rent, mortgage rates, gas and electricity are a staggering 78% above the European average,” said head of communications at bonkers.ie Daragh Cassidy.

At the end of last year, the Banking and Payments Federation Ireland stated the average first-time buyer mortgage in Ireland was around €266,000. This means someone borrowing this amount over 30 years is paying around €183 extra a month, or €2,200 a year, compared to other European countries.

The weighted average interest rate on new fixed rate mortgage agreements, which account for 81% of all new agreements, was 2.60% in February. This equates to a decrease of five basis points on February 2021 and an increase of one basis point on the previous month. The total volume of new mortgage agreements amounted to €626 million in February 2022. This represents an increase of 1% on February 2021.

The average interest rate on new consumer loans was 6.65% in February 2022. The volume of new consumer lending, including renegotiations, stood at €206 million in February 2022 which is an an increase of 41% on February 2021.

With inflation rising and the war in Ukraine causing supply uncertainty, Minister for Finance Paschal Donohoe is set to announce a new cost of living package to ease some of the cost pressures on Irish households.

These pressures have also led to the European Central Bank (ECB) discussing increasing interest rates in the coming months.

“The current war between Russia and Ukraine has significantly clouded the forecast for the timing of a potential rate rise. However it’s likely the ECB will feel compelled to act soon and follow the US, UK and New Zealand central banks, which have all raised rates recently,” said Mr Cassidy.

“However Irish mortgage rates are so out of kilter with the ECB base rate that we could see a small increase in the ECB rate not being passed on to consumers. It’ll somewhat depend on the competitive pressures the banks feel under,” he added.