MORTGAGE RATES IN Ireland are now higher than the Eurozone average, according to new figures from the Central Bank. 

It comes after the European Central Bank increased interest rates for an eighth consecutive time last month. 

The average interest rate for a new mortgage in Ireland was 3.84% in May, up from 3.63% in April.

The eurozone average mortgage rate rose by 12 basis points to 3.7%. This is up from 1.76% in May of last year and almost three times higher than in 2020.

The figures show that mortgage rates rose in all eurozone countries apart from Malta, which has the lowest rate in the bloc at 1.73%.

The Central Bank also revised its figures for interest rates from February of this year upwards from 2.92% to 2.98%, meaning rates have now been on a steady upward path since last November.

Daragh Cassidy, head of communications at broker bonkers.ie, said the figures are unsurprising given the increases in mortgage rates that have been announced over the last few months.

“However our mortgage rates are still among the lowest in the Eurozone. For now at least,” he said.

“This is because the main banks have been so slow at passing on the full brunt of the ECB rate increases to their mortgage customers.”

Cassidy said a further 0.25 percentage point hike likely to come when the ECB meet again near the end of the month.

“However the main banks have only hiked their fixed rates by around 1.5 to two percentage points on average, and variable rates have only gone up by around one percentage point at AIB and PTSB, and they haven’t moved at all at Bank of Ireland,” he said.

Despite that, this has largely come at the expense of savers, he pointed out. 

“Savings rates in Ireland are still poor. The best rate from the Irish banks is just 2% from AIB. And BOI and PTSB only pay a maximum of 1.5%. However deposit rates over 3.60% are now available from some banks in Europe.

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

He said that the lowest non-green fixed rate from AIB and EBS for a first-time buyer borrowing €270,000 with a standard 10% deposit is 4.55%, while the lowest fixed rate from PTSB is 4.25%. “These rates are still competitive compared to rates on offer elsewhere in Europe,” he added.

Cassidy also warned prospective mortgage holders and those on trackers that rates are set to go even higher over the coming months.

The ECB is likely to hike its main lending rate, off which trackers and mortgage rates are priced, to 4.25% when it meets at the end of the month and there’s about a 50/50 chance it could hit 4.50% in September, he said.

“This means the average tracker customer could soon be paying a rate of around 5.60% or 5.70% while the best rate available to prospective first-time buyers will likely be over 5% by the end of the year.”

Cassidy urged people on trackers, variable rates, or who are soon to come to the end of their current fixed-rate period to speak to a mortgage broker to assess their options before rates rise further.