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Mortgage rates rose in January to seventh highest in eurozone

By March 14, 2024No Comments

The average interest rate on new mortgages in Ireland rose in January, according to new data from the Central Bank.

At the end of the month, the average rate was 4.27%, up 0.08% from a month earlier.

It means rates on new mortgages in Ireland are now the seventh most expensive in the euro area, an increase from eleventh place in December.

In the same month, the equivalent average rate across the euro area fell by 0.10%, to 3.96%.

This is because in some countries the cost of raising funds on capital markets has eased recently ahead of an expected drop in ECB rates over the coming months.

Nevertheless, according to comparison website, Bonkers.ie, rates varied hugely across the bloc, from as low as 2.44% in Malta to as high as 6.07% in Latvia.

“Irish mortgage rates have remained broadly steady over the past few months. And despite the month-on-month jump they remain relatively close to the Eurozone average,” said Daragh Cassidy, head of communications at Bonkers.ie.

“Looking forward, it now seems highly likely that the ECB will start to cut interest rates from June and we could see three or four 0.25 percentage point cuts by the end of the year.”

Mr Cassidy added that while tracker customers will benefit almost immediately it’s unlikely AIB, Bank of Ireland and PTSB will respond to any rate cuts immediately as they have only passed on less than half of the ECB rate hikes to date.

“It could be into early next year before we see the main lenders drop their variable and fixed rates for new and existing customers,” he said.

“However, for the non-bank lenders like Finance Ireland and ICS Mortgages, we could see them drop their rates fairly significantly over the coming months as the cost of raising money on capital markets, from where they get all of their funds, falls.”

“However, their rates right now are high compared to the main lenders.”

The Central Bank data shows that average rates on new home loans were 1.34% higher than they were in January of last year.

Fixed rate mortgages make up three quarters of new lending at the moment and the average rate on these climbed 0.06% to 4.2%, while the average rate on new variable mortgages rose 0.07% to 4.47%.

“Despite the predicted fall in ECB rates over the coming year, those on fixed rates that are due to come to an end over the next few months still need to be preparing for potentially higher repayments,” Mr Cassidy said.

“Many mortgage holders who took out a fixed rate over the past three or four years may be enjoying rates as low as 2% or 3% at present.”

“But they’ll generally be faced with new rates of between 4% and 5%, if not higher, when they look to refix over the coming months even if the ECB starts to cut rates soon.”

Meanwhile, on savings the Central Bank data shows that rates on new overnight deposits by households rose to 0.13% in January, the highest level since December 2016.

But the average rate on new household term deposits actually fell 0.22% to 2.51% during the month.

This compares to 3.2% in the euro area.

€1.19bn was moved by households into Irish based term deposit products during the month, a 24% increase on December – a sign that the inertia among savers is starting to decline.

Article Source – Mortgage rates rose in January to seventh highest in eurozone – RTE

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