Irish homeowners still paying more for mortgages than European counterparts - Central Bank

In a new report, it said that the weighted average interest rate on all new mortgages agreed in Ireland was 2.93pc in October, down 0.08pc since the beginning of the year.

But the average rate across the eurozone was just 1.37pc in October, underscoring just how expensive Irish mortgages are.

Brokers Ireland said that mortgage rates here are costing home owners €236 extra a month on a €300,000 mortgage. That works out at €85,000 moreover the life of a mortgage.

Rachel McGovern, director, financial services, at Brokers Ireland said the extra cost is a “massive loss” that represents a lost opportunity for home owners to use the money for other critical financial outlays such as pensions or their children’s education.

She added that the high rates here point to a continued lack of competition.

“However, if the country can manage to break down the barriers to building more homes and succeed in building the 340,000 new dwellings the Central Bank this week estimated will be needed up to 2030, then we will not only see more affordable homes, the country will be more attractive for new lenders to enter, which should result in better euro area type mortgage products,” she predicted.

The difficulty that banks have in repossessing properties here where borrowers have defaulted on their loans contributes to the higher cost of mortgage lending in Ireland. The banks here also have to set aside more capital than their Eurozone peers as a buffer because of higher rates of default in Ireland, pushing up borrowing costs for consumers.

The Central Bank said that the new mortgage agreements inked in October amounted to €810m, bringing the total for the first 10 months of the year to €6.95bn. That’s 11pc more than in the first 10 months of 2018. The amount of new mortgage agreements in October was just 3.8pc higher in October than in September, however.

Daragh Cassidy of price comparison site Bonkers.ie urged first time buyers in particular to shop around for the best mortgage rates.

“Make sure you do your research and shop around,” he said. “There’s now a huge variation in interest rates and cashback incentives across all the different lenders so find out who’s offering the best deal for you. There are now rates as low as 2.25pc on offer.”

Mr Cassidy also said people who already have mortgages should look at switching. He said it’s “crazy” that many people are reluctant to move their mortgage given the savings they could make.

Greece continues to have the most expensive mortgages in the eurozone on average, but Ireland is a close second. Even Spain and Portugal, whose economies suffered heavily during the downturn, have much cheaper mortgages than those in Ireland.

The latest Central Bank figures also show that fixed-rate mortgages continue to dominate new lending, with 75pc of new mortgage agreements being tied to such rates.