Irish first-time buyers pay €180 a month more than EU neighbours for mortgages

First-time buyers are spending €262,000 on a property, on average, meaning someone borrowing this amount over 30 years is paying €2,100 a year more than their European counterparts. File Picture: iStock

The average first-time housebuyer in Ireland is paying €180 more a month on mortgage repayments than our European neighbours. 

Ireland is again top of the table for having the highest mortgage rates of any Eurozone country, according to data released by the Central Bank. The country's average mortgage interest rates of 2.69% rank us number one in the 19-country Eurozone.

First-time buyers are spending €262,000 on a property, on average, meaning someone borrowing this amount over 30 years is paying €2,100 a year more than their European counterparts.

Although rates are down 0.1% compared to February last year, the average Irish rates are still more than double the Eurozone average of 1.29%. Ireland is joined in the top three by Greece and Latvia, with mortgage rates of 2.55% and 2.26% respectively.

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Average rates are below 1% for the three countries bottoming out the rankings. Finland has the lowest average rates in the Eurozone at just 0.77%, followed by Portugal at 0.82% and Slovakia at 0.98%.

High mortgage rates in Ireland can be attributed, at least in part, to strict rules around lending. As mortgage lending in Ireland is considered risky, banks must hold around three times the level of capital to safeguard against potential loan losses compared to banks in the rest of Europe.

Daragh Cassidy, Head of Communications at comparison and switching website bonkers.ie, said the fact mortgage rates remain so high here is “deeply frustrating”.

“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,” he said.

🏠💰Comparing Q3 2021 with 2010, the highest increases in house prices in the EU in:
🇪🇪Estonia (+141%)
🇭🇺Hungary (+118%)
Largest decreases:
🇬🇷Greece (-28%)
Highest rent increases:
🇪🇪Estonia (+162%)
🇱🇹Lithuania (+111%)
Largest decreases:
🇬🇷Greece (-25%)
👉https://t.co/YnIGuAga9A pic.twitter.com/GHgSQOI9Bz

— EU_Eurostat (@EU_Eurostat) January 14, 2022

Mr Cassidy said the ECB is expected to gradually start increasing rates towards the end of this year. However, he added that given the huge disparity between rates in Ireland and the rest of the Eurozone, Irish lenders will potentially absorb the increase.

Despite remaining at the top of the table, mortgage rates have been falling slowly in Ireland in recent years. Although big lenders such as Bank of Ireland and Permanent TSB charge higher rates, Avant Money and ICS Mortgages now both offer rates as low as 1.95%.

Mr Cassidy advised that first-time buyers at the start of their mortgage journey should shop around, and research all mortgage lenders.

“Avant Money and even ICS Mortgages may not be familiar names to many mortgage seekers, who may be tempted to go with more well-known lenders such as AIB and BOI as their first port-of-call. However, recent developments mean it is these smaller or newer lenders who are offering some of the best value right now,” he said.

For those who already have a mortgage, Mr Cassidy advised to follow in the footsteps of the record high 7,000 people who switched mortgage last year.

“Anyone who took out a mortgage a few years back is likely to be paying rates far in excess of the 2.69% average. So for them, switching could help them save a huge amount. The recent increase in property prices also means people have more equity in their home, which will help them get a lower mortgage rate,” he said.