Average interest rate on new mortgages falls with more reductions expected 

According to the latest data from the Central Bank of Ireland, as of the end of November the average interest rate on new Irish mortgages was 3.97% down from 4.03% in October. File photo: Leah Farrell/Rollingnews.ie

Interest rates on new mortgages have hit their lowest level since May last year with more reductions expected as recent cuts slowly make their way through the system, new data from the Central Bank of Ireland shows. 

According to the latest data from the Central Bank of Ireland, as of the end of November the average interest rate on new Irish mortgages was 3.97% down from 4.03% in October. This follows three interest rate cuts of 0.25% by the European Central Bank in June, September and October.

However, it does not account for the 0.25% rate cut announced in December which means that the average rate could still fall further.

Despite the reductions, Ireland still has the sixth highest interest rates on new mortgages in the eurozone with Latvia, Estonia, and Lithuania topping the table. The average rate across the eurozone was 3.43%.

The weighted average interest rate on new fixed rate mortgage agreements, which constitute 70% of new mortgage agreements, was 3.79% during the month whereas the variable rate stood at 4.41%. 

The total volume of pure new mortgage agreements stood at €1bn in November representing a €40m drop compared to October and a decrease of €176m compared to the same period in 2023. Renegotiated mortgages totalled €148 million in November, down €150m month-on-month.

In terms of consumer loans, the average interest rate stood at 7.81%. The total volume of these loans during the month was €187m.

Chairperson of Irish Mortgage Advisors, Trevor Grant, said the fall in interest should continue into 2025 given the rate cut in December and the potential for further cuts by the ECB.

“Markets are forecasting another four ECB cuts this year — with most of them expected in the first six months of 2025. This could see the average interest rate on new mortgages drop substantially in the coming months,” he said.

“The recent fixed rate mortgage cuts announced by a number of banks is evidence that this is already happening. Indeed, we could see multiple fixed and variable mortgage rate cuts this year. 

Homeowners and house hunters should get ready to make the most of these falling rates.

However, Mr Grant added the problem for prospective homeowners now is “runaway house prices”, adding they should be looking around for the best mortgage deal they can afford. “Substantial savings could be up for grabs,” he said.

All this comes as the European Central Bank (ECB) is due to meet again at the end of this month. It is not clear yet whether another rate cut will be announced but rates are expected to continue to decline throughout much of this year.

On Wednesday, ECB vice-president Luis de Guindos said they will continue to lower rates as the eurozone economy struggles while Governing Council member Francois Villeroy de Galhau said it makes sense to move towards a rate of 2% by the summer. The ECB’s deposit rate is currently at 3%.

Additional reporting Bloomberg