New mortgage rate reaches 4pc average, signaling potential future hikes

The average interest rate on new mortgages in Ireland rose to 4.04% in June, a significant increase from 3.84% in May, based on data from the Central Bank. This jump of 0.20 percentage points was the second-largest increase in the Eurozone. While mortgage rates fell in other countries, they continued to rise in Ireland. Despite the increase, Irish rates remain relatively competitive compared to the Eurozone average. In June, Ireland had the ninth-lowest mortgage rate in the Eurozone, where rates ranged from as low as 1.93% in Malta to as high as 6.02% in Latvia.

However, it should be noted that these figures were captured in June and since then, several lenders have increased their mortgage rates in Ireland. Daragh Cassidy, a mortgage broker from Bonkers.ie, highlighted the impact of the European Central Bank’s (ECB) aggressive rate increases in the past year on Irish mortgage customers. The ECB has implemented nine rate hikes, leading to an average rate that is now nearly 1.50 percentage points higher than it was at the end of last year. Cassidy warned that rates may continue to rise in the coming months, with a 50/50 chance of at least one more quarter-point rate hike from the ECB.

In the current environment, the average rate for someone applying for a mortgage in Ireland today is closer to 4.50% or 4.75%. Cassidy also noted that even if the ECB does not increase rates further, it is likely that main lenders will still raise their rates for variable rate and new fixed-rate customers. This is due to the fact that lenders have only passed on about half of the previous ECB rate hikes. However, there is a silver lining as deposit rates are expected to reach nearly 3% by the end of the year. It’s worth mentioning that a few credit unions are still offering unchanged mortgage rates.