Irish mortgage holders continue to pay more than Euro counterparts

Commenting on the most recent Central Bank Retail Interest Rates publication for April, Brokers Ireland said with the second highest rate in the eurozone, after Greece, Irish mortgages holders are paying over €83,000 more than their euro area counterparts on a €300,000 mortgage over 30 years. (see chart below ).

Rachel McGovern, Director of Financial Services at Brokers Ireland said the reason for higher mortgage rates in Ireland is frequently attributed to the higher levels of capital banks in the Irish mortgage market have to hold, the high level of arrears and the difficulty in realising the collateral when loans go into default.

“However, the Central Bank has recently indicated that the higher capital reserves required account for about 0.5 percent to the interest rate. That raises the question as to what exactly is responsible for the remaining 1.04pc over and above the euro area average that Irish mortgage holders must pay.

“It is significant that KBC and Ulster Bank have cited such capital requirements, a legacy of the last financial crash, as reasons for their leaving the Irish market,” she said.

However, she said in terms of mortgage arrears Irish banks have offloaded the majority of their bad loans.

“Therefore it is difficult to comprehend why they are still compelled to hold higher reserves to back mortgages.

“Nonetheless, it appears from recent comments by the Central Bank that it is satisfied with the current situation, the detail of which remains opaque in relation to how it works, and it has no intention of seeking support from the ECB for change,” she concluded.


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