Irish first-time buyers pay €61k more in interest than other Europeans

The Government and Central Bank regulators have been accused of letting down customers after it emerged Irish first-time buyers will pay up to €61,641 more in interest costs over the lifetime of their mortgages than anywhere else in Europe.

Irish first-time buyers pay €61k more in interest than other Europeans

Overcharging of interest rates means Irish new home buyers in their lifetimes will pay the equivalent of at least one year of the national average full-time wage of around €45,600 just to meet the additional interest costs levied by lenders here.

Figures prepared for the Irish Examiner by Michael Dowling — one of the country’s leading mortgage brokers and debt advisers —show a first-time buyer in Dublin currently pays €206 a month more in interest payments than a new homeowner living in the rest of Europe, and will end up paying €61,641 more in interest costs over the life of the 25-year mortgage than their fellow Europeans.

It is a similar picture outside Dublin, even though the first-time buyer is paying less in interest costs because house prices are lower.

Outside Dublin, the home buyer currently pays €142 a month more than the new home buyer in the countries that make up the eurozone, and will pay €42,588 more in interest than the continental European counterpart over the life of the mortgage.

The analysis is based on the Central Bank’s own regular bulletin on retail interest rates which yesterday showed the weighted average cost of new variable rate mortgages, at almost 3.3% in February, was “significantly” higher than the 1.8% equivalent rate across the eurozone as a whole.

“Irish mortgage holders pay twice as much in interest than our European neighbours. The figures are stark,” said Mr Dowling.

Signalling out the Central Bank, his analysis of the costs in euros over the lifetime of a mortgage showed just how badly Irish borrowers are being treated by banks which were bailed out by taxpayers, he said.

“The question is where is the Central Bank advocating on behalf of customers and consumers? The Central Bank publishes the figures and I do not see who is protecting the borrowers,” said Mr Dowling.

“The regulators are not delivering in terms of protecting consumers.”

Dermott Jewell, policy and council adviser at the Consumers’ Association of Ireland, said the Government was conflicted as owner of stakes in the three main mortgage banks and was doing little to alleviate the long-standing problems of banks charging excessive interest rates in Ireland, while looking after the interests of bank shareholders.

“The [Irish] banks argue that they have higher non-performing loans,” he said. “So why are Irish people subsidising non-performing loans and the losses are being borne by the customers?”

Mr Jewell said that higher interest rates were also pushing up the costs for landlords and therefore helping to push up rents too.

Mr Dowling said the issue of non-performing loans should be dealt with by writing down debt because the lenders supposedly have enough capital, and should not be selling off mortgage loans to vulture funds.

His figures show that:

  • In Dublin a first-time buyer will typically have a mortgage of €275,000 over 25 years. At the average rate of 3.28% reported by the Central Bank, the new buyer in Ireland will pay €1,345 a month. At the eurozone average rate of 1.8%, fellow Europeans pay €1,139 a month, a saving of €206 a month. Over 25 years, first-time buyers in the rest of Europe save €61,641 in interest payments compared with their Irish counterparts.
  • Outside Dublin, a first-time buyer will typically have a mortgage of €190,000. The new buyer in Ireland will pay €929 a month compared with €787 a month in the rest of the eurozone, representing a saving for fellow Europeans of €142 a month, or €42,588 over the life of the mortgage.

Meanwhile, Bank of Ireland’s new chairman Patrick Kennedy — currently deputy chair but best known as a former chief executive at bookie Paddy Power — is in line for a pay hike of up to €364,000 if he is to be paid the same as outgoing chairman Archie Kane.

Business: 18

More in this section