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Irish Independent
Irish Independent
Charlie Weston Twitter Email

Mortgage rates at record lows in December but are now going up fast

Pedestrians outside an AIB bank branch. Photographer: Aidan Crawley/Bloomberg

MORTGAGE rates in this country remained near record lows in December.

The average interest being charged on a new home-loan was the third cheapest in the Eurozone in the last month of last year, according to the Central Bank of Ireland.

However, there have been a string of rate rises announced by Irish lenders in the last two months now that the European Central Bank has increased its rate five times.

December’s average new mortgage rate was 2.69pc, up from 2.57pc in November.

The 0.12 percentage point increase was still smaller than the increase seen in the majority of other Eurozone countries.

This means Ireland retains its place as having the third cheapest mortgage rates in the Eurozone. This is a turnaround from recently when rates here were consistently higher than in the other 19 countries that are in the Eurozone.

Malta has the lowest average rate at 1.98pc. Latvia has the highest rate at 4.65pc.

Central Bank figures show the Eurozone average was 2.95pc in December.

This is the highest level since at least August 2017, and over double the rate compared to this time last year.

However, December’s figures are already dated as Permanent TSB, Bank of Ireland and AIB have increased their fixed rates, with AIB also raising its variable rates.

In January Permanent TSB increased its fixed rates by between 0.05 percentage points and 0.8 percentage points depending on the length of the fixed term, the size of the loan, and the size of the loan relative to the value of the property.

Bank of Ireland has now raised its fixed rates by 1 percentage point over the past few months, while AIB has hiked some of its fixed rates by up to 1.75 percentage points and last week became the first main lender to hike its variable rates.

Daragh Cassidy of said at 2.69pc for last December, rates are back where they were in December 2021.

This is despite the average Eurozone rate more than doubling over the same period.

“So, these figures show once again how slow the Irish banks were to pass on the ECB rate increases initially. However, that is now changing.”

He said the Central Bank figures apply for mortgages which were drawn down in December but applied for several weeks or months beforehand.

“Someone who applies for a mortgage today will be faced with much higher rate options. The cheapest fixed rate in the entire market is now 2.90pc with Bank of Ireland. However, this is a green rate and to get this you must borrow at least €250,000 and buy a property with a BER of at least B.”

The average rate for a mortgage applied for today is now well over 3pc, Mr Cassidy said.

Over the past five or six years, mortgage rates in Ireland have been around 1.3 to 1.5 percentage points above the Eurozone average.

Mr Cassidy said it was not clear if that historical margin will remain, or if Irish rates become similar to Eurozone rates.

The European Central Bank raised its main borrowing rate by half a point to 3pc last week, promising the same next month.

It was the ECB’s fifth rate hike since July.

Further rate rises are in store, despite the fact that Eurozone inflation eased to 8.5pc in January (and to 7.7pc in Ireland), from above 9pc in December.

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