Mortgage rates fall to their lowest level in nine months after new drop in May

At 4.17pc, the average interest rate on a new mortgage in Ireland decreased by 0.07 percentage points compared with April. This comes on top of a similar drop in April.

Despite the fall, Ireland still had the joint sixth highest rates in the Eurozone. The Eurozone average remained broadly steady at 3.80pc.

However, rates varied hugely across the currency bloc, from as low as 1.97pc in Malta to as high as 5.97pc in Latvia.

Lenders including AIB, Haven, EBS, Bank of Ireland, PTSB and Avant Money all cut their rates in anticipation of last month’s reduction in European Central Bank (ECB) rates.

Head of communications at mortgage broker Bonkers.ie Daragh Cassidy said it had been expected that the average interest rate would ease 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,” he said.

Mr Cassidy said that already the average first-time buyer could get a fixed rate of under 4pc with PTSB and Bank of Ireland.

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It is expected that the ECB will cut its interest rates again in September, with an additional adjustment due to the rate that trackers are priced off due that month also.

Mr Cassidy said that this would hopefully put further downward pressure on mortgage rates.

“Yet regardless of how quickly or by how much rates fall later this year, 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.

He said that many mortgage holders who took out a fixed rate over the past three or four years may be enjoying rates as low as 2pc or 3pc at present.

But they will be faced with higher rollover rates of around 4pc to 4.50pc when they look to re-fix over the coming months.

Meanwhile, a non-bank lender that specialises in equity release loans said it had seen a surge in borrowing.

Spry Finance said it has experienced a 40pc increase in the value of lifetime loan offers for the first six months of this year.

It said it averaged €1.4m in switching loan offers each month in the first and second quarters of this year, compared to €1m per month in the same period last year.

Recent data released by the Central Bank, which includes all lenders in the Irish market, showed a greater rate of switching to specialist, non-bank lenders.

This is in contrast to the trend experienced by traditional bank lenders, where switching activity has fallen dramatically this year compared with last year.

Spry Finance provides lifetime loans – a form of equity release product – to homeowners aged over 60.

Spry director David Brady said the data demonstrated there was a growing demand for mortgage switching options for older people that was not being met by traditional lenders.