Irish mortgage interest rates higher than Euro area equivalent

Mortgage interest rates for new loans in Ireland were broadly unchanged for the month of June, with an average rate of 3.38%, significantly higher than the equivalent Euro Area rate of 2.02%.

According to the latest survey of interest rates published by the Central Bank, variable rate new housing loans (excluding renegotiations) averaged 4.13% between April and June, remaining broadly unchanged from the first three months of the year.

The latest data show that for primary dwelling mortgages, new business fixed rates are below standard variable rates across all fixation categories following recent declines.

While variable rates have remained stable in Q2, fixed rate pricing on new business mortgage contracts has declined. In terms of new business PDH contracts, fixed rates have declined by nearly 20 basis points for both the ‘1-3′ and ‘over 5 years’ categories compared to Q1.

In a similar fashion, fixed rates on BTL mortgages, declined by 125 basis points for the ‘3-5 year’ fixation cohort.

Meanwhile, rates on new business term deposits continued to decline in June. Rates applicable to non-financial corporations decreased by five basis points to 0.13%, while the corresponding rates for households fell by 13 basis points to stand at 0.31%.

Rates on outstanding tracker mortgages, which account for almost half of all housing loans, were 1.05% and 1.02% for principal dwelling and buy-to-let loans respectively, at the end of June.

Interest rates on all outstanding loans for house purchase – a blended or combined rate for tracker and standard variable mortgages – were broadly unchanged at 2.66% at the end of Q2.

The new business loan-to-deposit spread for households has remained elevated for the last number of months.

The loan-to-deposit spread increased by some seven basis points over the month to June 2015, predominately driven by falling deposit rates.

Spreads have increased from circa 100 basis points in April 2012 to 367 basis points at end June 2015.

Lending rates extended to the real estate sector, which represents the largest SME category, declined by some 75 basis points in Q2 2015.

More generally, falling interest rates have been observed across a range of sectors in the second quarter, with construction and manufacturing both recording falls of more than 20 basis points in their respective new business rates. Despite this trend, rates increased by 22 basis points for the hotels & restaurants sector over the same period.

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