Mortgage interest rates in Ireland ‘diverging’ from ECB base rate

Average mortgage interest rates in Ireland are diverging from the base lending rate set by the European Central Bank, according to new figures from the Central Bank.

Up until recently, mortgage interest rates here closely tracked movements in the ECB’s main refinancing rate (MRO) more than comparable euro area rates.

This reflected the higher proportion of tracker and variable rate mortgage products in the Irish market which are linked to the ECB’s rate.

However, today’s figures, which do not account for the ECB’s most recent rate cut, show that over the past nine months the average Irish interest rate on outstanding mortgages has “diverged” from the ECB’s main rate.

While the ECB’s main refinancing rate stood steady at 0.75 per cent, the applicable Irish rate increased by 14 basis points.

The figures reflect moves by domestic banks to break from their traditional policy of automatically passing on ECB rate changes to people with variable rate mortgages.

Interest rates on outstanding loans to households for home purchase stood at 3 per cent at the end of March, the figures show, remaining relatively stable over the past year with a 12 month average of 2.96 per cent.

The corresponding interest rate reported by all credit institutions resident in the euro area declined to 3.49 per cent, falling by 36 basis points since the previous March.