Ireland's mortgage rates drop again as banks hold off passing on ECB hikes

Ireland's historically high rates are dropping closer to the European average

Unlike other European countries, banks in Ireland have yet to pass on the three interest rate hikes already announced by the ECB since July. Picture: iStock

Average mortgage interest rates in Ireland fell again in September as banks continue to hold off on increasing rates in response to a combined 2% increase by the European Central Bank (ECB).

New figures from the Central Bank of Ireland show the average rate on new mortgage agreements in September fell by 6 basis points to 2.58% compared to August. In the same period, the equivalent euro area average rose by 19 basis points to 2.4%. 

It means that Ireland, which has for many years seen some of Europe's highest interest rates are moving closer to the euro area average.

Ireland now has the eighth cheapest mortgage rates in the Eurozone, behind countries such as Germany, Belgium, the Netherlands and even Finland, which until recently had the lowest rates in the Eurozone at well under 1%.

The average interest rate on a new fixed-rate mortgage, which constitutes more than 90% of new mortgages, was 2.46% in September. The average variable rate mortgage increased to 3.78%.

Unlike other European countries, banks in Ireland have yet to pass on the three interest rate hikes already announced by the ECB since July of this year. A fourth rate hike is likely to be announced in December.

Bank of Ireland and Permanent TSB have yet to increase rates on any of their mortgages while AIB added 0.5% on its fixed-rate products.

“While rates have begun to shoot up elsewhere in Europe they’ve remained remarkably steady here for now," Daragh Cassidy of mortgage switching website bonkers.ie said.

He said that the 0.5% increase by AIB on fixed-rate mortgages only came into effect in the middle of October and given the lag between mortgage applications and drawdown may only be reflected in official data in the New Year.

"When the mortgage figures for October are released next month, Ireland could find itself having mortgage rates below the Eurozone average, which would be quite the turnaround," he said.

The Central Bank data for September shows the total volume of new mortgage agreements amounted to €1.1bn, an increase of 17% on the previous month and of 37% on the previous year.