Irish mortgage rates fall to almost two-year low but remain above EU average 

Chairperson of Irish Mortgage Advisors Trevor Grant said mortgage rates under 3% could become a reality for many Irish borrowers from this summer, depending on how quickly lenders cut their rates in response to the ECB

A pedestrian walks past an estate agents in South Kensington, London, as the banking chain Halifax has reported that house prices have edged up by 0.4\% month-on-month in November, but there are more signs that the pace of growth is slowing.

The average interest rate on new Irish mortgage agreements has fallen to an almost two-year low following a series of successive rate cuts by the European Central Bank (ECB).

New figures released by the Central Bank of Ireland on Wednesday showed that the average rate on new mortgages fell to 3.8% in December last year, down from 3.97% in the previous month and marking the lowest level since April 2023.

It also marks the largest monthly fall in Irish mortgage rates since 2017. 

However, despite the decrease, Irish mortgage rates remain notably above the Euro area average which fell by eight basis points in December to 3.35%. This means Ireland exceeded the euro average by 45 basis points, making it the 7th highest out of the 20-country Euro area. 

The ECB has cut interest rates five times since June 2024, marking the end of its aggressive monetary policy campaign which it embarked on to stabilise soaring inflation in 2022.

Markets expect two or three more this year, driven by arguments that the biggest inflation surge in generations is nearly defeated and the flagging economy needs relief.

“The fall in the average interest rate on new mortgages is a trend that should continue throughout the year given the recent ECB rate cuts and the expectation of more to follow," said Trevor Grant, chairperson of the Irish Mortgage Advisors.

"At 2.9%, ECB’s key lending rate – that is, the rate which impacts tracker mortgage holders and which also puts downward pressure on variable and fixed-rate mortgages - is now at its lowest level in two years."

Further reductions

Mr Grant said that given these recent measures, mortgage rates under 3% could become a reality for many Irish borrowers from this summer, depending on how quickly lenders cut their rates in response to the ECB.

"This will mark a significant milestone for mortgage borrowers and should lead to substantial savings for homeowners and house buyers."

"Indeed, Irish mortgage rates could even fall to as low as 2.5pc or below in 2025 if the ECB continues to cut its main lending rate in the coming months."

The weighted average interest rate on new fixed-rate mortgage agreements, which constitute 75% of the volume of new mortgage agreements, was 3.62% in December, a decrease of 17 basis points from November and 52 basis points lower than in December 2023, the Central Bank found.

Meanwhile, the total volume of pure new mortgage agreements increased to €1.2bn in December, a 13% increase in monthly terms and a 19% increase from December 2023.

Deposit rates 

Data from the Central Bank also showed the average interest rate on household deposits with a fixed maturity fell from 2.60% to 2.45% with the rate expected to decline further over the coming year, according to Daragh Cassidy of Bonkers.ie

"Deposit rates are falling. Fixed deposit rates are now at their lowest level since August 2023 and will fall more over the coming months," warned Ms Cassidy

"Irish households currently have around €160bn resting on deposit, but the majority of the money is still in accounts that pay little to no interest. 

I’d really encourage people with savings to lock into the higher rates while they’re still available."