Finance | Irish mortgage borrowing rates

To ask the Minister for Finance the degree to which Irish mortgage borrowers can expect to be in a position to borrow at a similar rate to those available throughout Europe given their perceived single market entitlements; and if he will make a statement on the matter.

REPLY
The price lenders charge for their loans is a commercial matter for individual lenders. As Minister for Finance I cannot determine the lending policies of individual banks including the interest rates they charge for loans including mortgages.  

I am aware that the general level of new lending interest rates in Ireland are higher than is the case in many other European countries however, it should also be noted that recent trends show that the interest rates on new mortgages have been falling in Ireland. For example, in July 2022 – based on the latest available data from the Central Bank – the weighted average interest rate was 2.63%, which is down from 2.69% at the end of 2021 and 2.73% in July 2021. .

Most new mortgages in Ireland are now fixed rate mortgages and the average interest rates on these mortgages, 2.50% at the end of July, is even a little bit lower.  At the end of 2021 this was 2.59%.  

Over the same period, the average Eurozone new mortgage interest rate has increased and, therefore, the differential between the Irish and the Eurozone mortgage interest rate has narrowed from 1.40% at end 2021 to 0.55% at end July 2022.

It should also be noted that Irish mortgages have different characteristics from those offered in other countries. For example, some Irish banks include incentives such as cash back offers, which reduce the effective Irish mortgage interest rate. Also Irish mortgages are generally not subject to upfront fees which are typically charged by banks in some other EU jurisdictions.

As regulator, the Central Bank has introduced a number of increased protections for variable rate mortgage holders in recent years. Firstly it made changes to the Consumer Protection Code which required lenders to explain to borrowers how their non tracker variable interest rates have been set and to clearly identify the factors which may result in changes to variable interest rates.  Secondly, it also increases the level of information lenders are required to provide their customers including where there is a possibility for the borrower to move to a lower ‘loan to value’ interest rate band and signpost the borrower to the Competition and Consumer Protection Commission’s mortgage switching tool.

Also, by considering and availing of the options available on the market, some borrowers may be able to reduce their mortgage costs.  Indeed a 2020 Central Bank study estimated that three in every five ‘eligible’ mortgages for principal dwelling homes stand to save over €1,000 within the first year if they switch and €10,000 over the remaining mortgage term.

To conclude I appreciate that greater sustainable competition in the credit market will be of benefit to consumers and other borrowers. Accordingly, the review of the retail banking market which is now underway in my Department will consider how the banking system can best support economic activity, assess competition and consumer choice in the market for banking services and consider options to further develop the mortgage market. I expect that the review will be presented to me before the end of this year.