Mortgage rates falling but still twice the euro area average

MORTGAGE rates have fallen in this country but remain more than double the average practiced in the euro zone.

This means that it costs € 190 more per month to pay off a mortgage in this country than the average in the money block.

New figures show that the rate for new mortgage contracts was 2.79 pc in February.

This is a drop of 12 basis points compared to the same month a year ago, but still more than double the euro zone average of 1.27 pc.

Ireland is again the second highest mortgage interest rate in the eurozone, according to central bank data.

Last month, the country topped the rankings for having the most expensive mortgages, but Greece is now the most expensive country for new home loans.

When variable rates are excluded from the calculations, the average new mortgage contract was 2.65% in February. Fixed-rate mortgages accounted for 82% of new deals during the month, the central bank said.

The volume of new mortgage contracts increased by 7% compared to the same month last year, to 617 million euros.

AIB and Permanent TSB have cut rates in recent weeks, with Spanish provider Avant Money expanding its low-cost mortgage offering to new locations across the state.

Bankinter-owned Avant’s move is expected to put more pressure on other lenders to cut rates.

Avant is already capturing a large part of the switch market with rates as low as 1.95 pc.

Permanent TSB has launched a four-year fixed rate mortgage for new customers starting at 2.25% for those who decide not to withdraw money when their mortgage is withdrawn.

AIB now has a rate of 2.1pc for the best-rated houses, where the loan is less than 50pc of the value of the house.

He also cut rates to 2.15 pc for clients taking out a mortgage between 50 pc and 80 pc of the value of the house, compared to 2.35 pc previously.

Daragh Cassidy of price comparison site Bonkers.ie said the drop in rates compared to the same period last year is welcome, but mortgage rates remain significantly high compared to our Eurozone counterparts.

“A first-time buyer who takes out a mortgage of € 250,000 over 30 years pays € 190 more each month compared to the euro zone average, or nearly € 2,300 per year. It is extremely frustrating. “

He said the higher rates also limit the amount people can borrow and make home ownership even more inaccessible.

If the rates here were the same as the euro area average, a buyer could borrow around € 300,000 instead of € 250,000 for the same monthly payment.

Lenders here blame the strict EU regulations on the amount of capital that must be set aside when issuing mortgages for the high cost of home loans.

Mortgage issuers in Ireland are required to hold around three times as much capital for the perceived higher risk on their mortgage books compared to average capital requirements in Europe, according to a report commissioned by the Banking and Payments Federation Ireland .

The report also states that the difficulty of repossessing a property is another main reason for the high cost of mortgages here.

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