Rates on new Irish mortgages fell slightly in May

Interest rates charged on new mortgages in Ireland fell in May, according to new data released by the Central Bank.

The average rate reduced by 7 basis points to 4.17% during the month.

That’s the lowest level it has been at since August of 2023 but stilll 33 basis points higher than in May of last year.

Across the euro area, the average remained at 3.8%, unchanged month on month and up 9 basis points compared to May of 2023.

It means that Ireland had the joint sixth highest mortgage interest rate in the eurozone that month.

The weighted average interest rate on new fixed rate mortgages was 4.02%, down 11 basis points from April.

Fixed rate mortgages make up two thirds of the overall volume of new mortgages.

The total volume of new mortgages rose to €821m in May, an 18.5% increase from the previous month, and a decrease of 5.5% on an annual basis.

“As expected the average interest rate eased again in May. And it should creep slightly lower over the coming months as the rate reductions that have been introduced by several lenders recently feed through into the figures.,” said Daragh Cassidy, head of communications with Bonkers.ie.

“Already the average first-time buyer can get a fixed rate of under 4% with PTSB and Bank of Ireland for example.”

“And of course if the ECB cuts rates for a second time before the end of the year, which it probably will do in September, that will hopefully put further downward pressure on mortgage rates.”

“Yet regardless of how quickly or by how much rates continue to fall, the tens of thousands of mortgage holders on fixed rates which are due to come to an end over the next few months still need to be preparing for potentially higher repayments.”

“Many mortgage holders who took out a fixed rate over the past three or four years may be enjoying rates as low as 2% or 3% at present. But they’ll still generally be faced with higher rollover rates of around 4% to 4.50% when they look to re-fix over the coming months.”

Trevor Grant, chairperson of the Irish Mortgage Advisors, said despite the fall house hunters should bear in mind that recent signals from the ECB suggest it is in no major hurry to cut interest rates again.

“Eurozone inflation is still higher than what the ECB would like it to be – so the ECB will likely be cautious about cutting rates until inflation is under control, though rates are thankfully heading lower rather than higher,” he said.

“It must be remembered too that even if the ECB reduces its rates further this year, Irish home-loan mortgage rates are highly unlikely to fall to the same extent. This is because home loan rates have not increased at the same levels as the ECB rate has, and because banks are under pressure to increase returns for their savers.”

“With this in mind, mortgage holders shouldn’t delay looking for a better deal on their mortgage as substantial savings could be up for grabs.”

Meanwhile, the data released today also shows that interest rates on household overnight deposits remained at 0.13% in May for the fifth consecutive month.

While the average interest rate on new household deposits with agreed maturity rose 3 basis points to 2.68% in the months, the 6th lowest in the euro area.