New buyers here paying €2,000 more for mortgages than average in Eurozone

Mortgages in this country are expensive when compared with the rest of the Eurozone. Stock image

Charlie Weston

MORTGAGE rates in this country continue to be the most expensive in the Eurozone, putting pressure on first-time buyers.

New figures from the Central Bank show that rates here were double those in the rest of the currency zone in August.

This means a typical new buyer is paying €2,000 more here a year for a mortgage than the average in the eurozone.

In August the average interest rate was 2.74pc, down 9 basis points on August last year.

The average for the euro area stood at 1.27pc.

Rates here are now the second highest in the Eurozone after Greece.

In July the country had the most expensive mortgage rates in the currency bloc.

Some €704m in new mortgage were drawn down in August, up 50pc on the same month last year when the onset of Covid-19 disrupted the market.

Daragh Cassidy of price comparison site said Irish mortgage rates still remain hugely elevated compared to our EU neighbours.

“While this month we’re no longer the most expensive in the Eurozone, the average rate has actually crept up slightly compared to last month.”

He said the competition that we are seeing in the market among some lenders still is not feeding through to the rates most people are getting charged.

“Based on a €250,000 mortgage, someone in Ireland is paying around €180 extra a month. It’s a huge sum of money.”

Non-bank lenders Avant Money, Finance Ireland and ICS Mortgages have been cutting rates, but there has been little response to this from banks such as AIB, Bank of Ireland and Permanent TSB.

The banks are benefiting from a boost in mortgage business from the impending departures from this market of Ulster Bank and KBC Bank.

The non-bank lenders are offering rates from 1.95pc. They are also offering fixed-rate terms of up to 30 years.

Brokers have encouraged existing homeowners to switch to lower their mortgage repayments, if they are not on a tracker.

Mr Cassidy said housing costs in particular in Ireland are hugely out of line with the EU average, partly because of our high mortgage rates, and with energy bills set to soar this winter many households will feel the pinch.

Banks blame elevated mortgage rates here on higher levels of arrears and the difficulty repossessing properties, where the mortgage is not being paid.

They also argue that Irish lenders have to put aside more capital when they issue a mortgage.

But rates have come down in the past year.

Meanwhile, the interest rates being paid to depositors are well below Eurozone average, the Central Bank figures show.

Interest rates on new household term deposits stood at 0.10pc in August. The equivalent euro area rate was 0.22pc.

The European Central Bank charges banks across the Eurozone for excess cash they deposit with it.

AIB and Bank of Ireland have moved to charge negative interest rates to high-net-worth individuals with more than €1m deposited with them.

Corporates are already being charged negative interest rates.

The volume of its deposits subject to negative rates will have almost quadrupled over the course of 2021 to €15bn, it is estimated.

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