Irish mortgage holders still paying for mistakes of the past

Commenting on the most recent Central Bank Retail Interest Rates publication for February, Brokers Ireland said the increase in the volume of new mortgage agreements of seven percent year-on-year in February and particularly the 23 percent increase month-on-month between January and February 2021 reflects the increasing demand for mortgages, despite the ongoing pandemic.

The organisation, which represents 1,225 Broker firms, said the data also shows that while the weighted average interest rate on new mortgages remained static month-on-month at 2.79 percent, the euro area average equivalent dropped from 1.29 percent to 1.27 percent. This means Irish mortgages holders are currently paying a premium of 1.52 percent, or more than double what their euro area colleagues are paying.

“This is costing an Irish mortgage holder with a €300,000 loan over 30 years in excess of €82,000.

“Effectively it means all new mortgages holders since the financial crash of 2008 to 2010 are paying for the fallout because Irish lenders are compelled to hold larger capital reserves, three times more that their European counterparts, according to Banking and Payments Federation Ireland, although this is not the only reason cited for Ireland’s higher rates.

“The question that arises is that, given that Irish lenders have now offloaded the majority of their bad loans, why this should still prevail, and that is a question for the Irish and European Central Banks,” Rachel McGovern, Director of Financial Services at Brokers Ireland, said.

Ms McGovern noted that in today’s Central Bank publication 82pc of new agreements involve fixed rate mortgages. Fixed rates are intended to give more security and certainty around repayments.

“Traditionally fixed interest periods in Ireland have been for less than three years. While a number of lenders now offer fixed rates for periods up to 10 years, there is no rationale whatsoever as to why they should not be able to go beyond – for up to 20 years or the lifetime of the mortgage, as in some European countries,” she said.

She said while Avant Money has introduced some competition into the Irish banking market, the exit of Ulster Bank is a negative in terms of competition.


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