Mortgage rates down here, but still second highest in the eurozone

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IRELAND was the only country in the euro zone where mortgage rates fell in June, but we still have the second highest rates in the currency zone.

nd the gap between home loan rates here and the rest of Europe has closed in recent months.

The figures came before the European Central Bank (ECB) announced a shock 0.5 percent hike in its key interest rate last month.

The average interest rate on new mortgages in the country was 2.68 percent in June, compared with 2.73 percent in May, according to the latest Central Bank of Ireland data.

Ireland is the only country in the 19-member eurozone where interest rates are falling month-on-month.

All other countries recorded a sometimes significant increase in their average rate in June.

However, the average interest rate on a new mortgage in Ireland is behind only Greece in the eurozone of 19 countries. Prices in Greece are 3.10 percent.

The eurozone average is 1.90 percent, the highest since at least August 2017.

In contrast, the average Irish mortgage rate is at its lowest on record.

A new buyer couple, who typically borrow 270,000 euros over 30 years in this country, end up paying 105 euros more per month than the average in the euro zone.

This corresponds to a gap of €1,260 over one year.

There has been mixed news on the home mortgage front in recent months, with Permanent TSB, Bank of Ireland and EBS all cutting some of their interest rates.

But ICS Mortgages, Avant Money and Finance Ireland have all topped some of them.

Daragh Cassidy of price comparison site Bonkers.ie said it is ironic that rates are falling here and rising elsewhere in the eurozone while the ECB is raising interest rates.

“There is something deeply ironic that the ECB has started raising interest rates, and as rates have soared in every other eurozone country, they are falling here.”

The ECB’s hike last month prompted all major lenders to say they will not pass the hike on to their customers with fixed or variable rates for the time being.

But tracker prices will increase this month.

Mr Cassidy said this meant we could see later in the year that Ireland had interest rates very close to the euro zone average, at least for a while.

“That would be a bizarre but very welcome turn of events.”

At 2.59 percent, interest rates in Germany are now almost as high as in Ireland, which nobody would have predicted a few months ago.

Mr Cassidy said the ECB had signaled it would raise rates further, which could rise by another percentage point.

“Most of that increase will ultimately be passed on to mortgage customers. How strong depends on the competitive pressure that the banks feel they are under. I could see that another 0.25 percentage point hike wasn’t being passed on by the banks,” Cassidy said.

He said anyone who has an adjustable rate should seriously consider sticking with a longer-term fixed rate.

Banks blame central bank rules for having to set aside more capital than their counterparts in the rest of the eurozone when issuing a mortgage.

This is seen as a legacy of the financial crash more than a decade ago.

They also argue that the slow processes of redemption, even if nothing has been paid on a mortgage for ten years, is a key factor in interest rates being higher here than in the rest of the eurozone.

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