Irish mortgage rates reach highest level since at least 2017 after sharp rise

Tomas Doherty

Irish mortgage rates have resumed their upward trend and reached their highest level since at least mid-2017, according to the Central Bank of Ireland.

At 3.54 per cent in March, the average interest rate on a new mortgage was up significantly from 2.92 per cent in February.

The figures reveal that rates in Ireland increased far more in March than in any other euro zone country.

Despite the big month-on-month jump, Ireland is still among the countries with the lowest mortgage rates in the euro zone, with only France and Malta having lower rates.

The euro zone average rose to 3.52 per cent, almost three times the rate it was around 18 months ago.

Last week the European Central Bank (ECB) raised interest rates by 25 basis points to 3.25 per cent and signalled that more tightening would be needed to tame inflation.

Commenting on the news, Daragh Cassidy from bonkers.ie said the main Irish banks have been slow to pass on the ECB rate increase to mortgage holders.

“Since last July, the ECB has hiked rates by 3.75 percentage points," he said. "However the main banks have only hiked their fixed rates by around 1.5 to 2 percentage points on average. And variable rates have hardly moved at all.

"However this ‘generosity’ has largely come at the expense of savers. Savings rates in Ireland are still miserable. The best rate from the Irish banks is just 1.50 per cent with PTSB. And BOI only pays a maximum of 0.75 per cent. However, deposit rates over 3 per cent are now widely available in Europe.

"In essence, savers are now heavily subsidising mortgage holders. Whether that’s right will differ vastly depending on whether you talk to a mortgage holder or someone with big savings."

Mr Cassidy warned prospective mortgage holders and those on trackers in particular that the medium-term outlook is for rates to go much higher over the coming months.

"The ECB is likely to hike its main lending rate, off which trackers and mortgage rates are priced, to 4 per cent when it next meets in June, and it’ll probably hit 4.25 per cent by the end of the summer. This means the average tracker customer will soon be paying a rate of around 5.5 per cent while the best rate available to prospective first-time buyers will be similar."