Interest rates remain twice eurozone average

The average Irish mortgage interest rate fell by 24 basis points in the 12 months to the end of February, but it is still nearly twice the eurozone average, according to figures released by the Central Bank yesterday.

The average interest rate across the 19 member state currency bloc is 1.8 per cent. Variable rate mortgages accounted for almost two-thirds of all new agreements in Ireland over the past year. The equivalent euro area share of variable rate mortgages is fewer than 20 per cent.

The interest rate on residential mortgages fell by 35 basis points to 3.4 per cent over the 12 months to the end of 2016. Fixed-rate residential mortgage rates also declined, with rates fixed for 1-3 years falling by 39 basis points over the same period.

The share of fixed-rate mortgages in new mortgage drawdowns declined over 2016 but remains at about 40 per cent of all new residential mortgages, the Bank said.

Michael McGrath, the Fianna Fáil finance spokesman, has proposed a bill to give the Central Bank powers to cap the rates that banks charge for mortgage products. The bill has been passed by a Dáil majority and is now at the Oireachtas committee stage.

Michael Noonan, the finance minister, opposed the bill and said that it would discourage new entrants to the Irish market when only increased competition would lower rates.

New variable buy-to-let mortgage rates declined by 20 basis points over the year to the end of December, to stand at 4.71 per cent. Fixed rate buy-to-let mortgages, however, remained relatively static over the period, and stood at 4.78 per cent, the Bank said. The majority of buy-to-let lending is at variable rates, accounting for 90 per cent of new drawdowns in the fourth quarter of 2016.

The volume of new mortgage agreements, excluding renegotiations, amounted to €369 million in February 2017, bringing new agreements to €5.1 billion over the past 12 months, the Bank said. This compares with new mortgage agreements of €4.4 billion in the 12 months to February 2016, it added.

Renegotiated mortgages, which are a restructuring agreement between borrower and lender, totalled €419 million in February, with variable rate products accounting for the majority of renegotiations. The weighted average interest rate for renegotiated mortgages was 3.01 per cent in February.

Interest rates on new household term deposits remained subdued in February, at 0.13 per cent. This represented a 6 basis points decline over the past 12 months. While equivalent euro area rates had a slightly larger decline of 19 basis points over the same period, they remain higher at 0.43 per cent.

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