Mortgage holders advised to act with 'extreme caution' amid interest rate change

James Cox

Responding to today’s Central Bank Retail Interest Rates publication for June showing the weighted average interest rate on new Irish mortgages down six basis points to 4.11 per cent, Brokers Ireland have advised all mortgage holders to move with "extreme caution".

They also advised people to ideally take impartial advice, particularly in the current period of change.

Rachel McGovern, Brokers Ireland deputy chief executive, said competition between providers was improving with the advent of new lenders.

“And there is optimism about further ECB rate reductions before the end of the year,” she said.

“New mortgage applicants, those on variable rates who could switch, and those coming off fixed rates around now, up to 80,000 this year alone, and who will face what is for them much higher interest rates, need to consider their next decision very carefully.”

However, many are stuck on very high rates, particularly those with non-bank lenders and the 180,000 tracker mortgage holders who have seen ten interest rate hikes since mid-2022 with just one rescinded.

“While the latter have enjoyed very low interest rates for about 16 years or more before the ECB started hiking rates, most took out their mortgages at the height of the property boom and so would have seen very substantial increases in their repayments since mid-2022,” she said.

And she said some mortgage holders who are on variable rates could benefit from looking around to see if they can switch lenders. This is also the case for those whose mortgages are with credit servicing firms.

Ms McGovern said Brokers would like to see greater competition, eventually leading to the restoration of long-term fixed interest rates for extended periods, "the best of which were withdrawn quickly once the ECB started increasing its rate from July 2022 onwards.”

On savings rates, she said, while the weighted average interest rate on new household deposits with agreed maturity rose seven basis points to 2.75 per cent, overnight deposits in which most Irish savings are held remain static at 0.13 per cent.