Mortgage lending values continued to decline at the year’s halfway mark amid fierce competition for homes and as borrowers await further potential interest rate cuts this year.
The Central Bank of Ireland’s latest retail interest rate figures show the total value of new mortgage agreements in June had slumped 6 per cent from the same last month year to €808 million, down 2 per cent from May.
Across all mortgage product categories, the weighted average interest rate on a home loan in the Republic in June was 4.11, down 0.6 percentage points from May, which was the lowest level in nine months. The average rate here exceeded the euro zone average – 3.75 per cent – by 36 basis points and was the eighth highest in the euro area in June, the Central Bank said.
Meanwhile, the proportion of home buyers who opted for fixed-rate loan contracts increased slightly to 70 per cent from 66 per cent in May, as the average interest rate charged on new fixed-term mortgages decline by 0.7 percentage point to 3.95 per cent, the Central Bank said.
Irish lenders began cutting their fixed rates late last year, in anticipation of the European Central Bank (ECB) reducing its own rates this year for the first time since 2022 as headline inflation in the euro zone began to ease. Frankfurt then lowered its closely-watched deposit rate from a record 4 per cent to 3.75 per cent at the June meeting of the ECB’s governing council but has offered no guidance on whether it will cut again this year.
Trevor Grant, chairman of Irish Mortgage Advisors, said Irish borrowers expecting further relief in 2024 may be disappointed with recent data suggesting inflation in July was higher than it was in June.
“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,” he said. “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.”
Separately, the Central Bank said the average rate on a household deposit account in the Republic ticked up to 2.75 per cent in June, the highest level in 15 years.
“Irish banking customers seem to have the best of both worlds at present: falling mortgage rates and increasing deposit rates. Though this is unlikely to last for much longer,” said Darragh Cassidy, head of communications at price comparison website Bonkers.ie.
“Although mortgage rates will likely ease a bit more over the coming months, especially if the ECB cuts rates for a second time before the end of the year, which it might do as soon as September, this is likely to start putting downward pressure on deposit rates also.”
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