Mortgage rates hit record lows in December but are now rising fast

However, in the last two months a series of rate hikes have been announced by Irish lenders after the European Central Bank hiked its interest rate five times.

The average interest rate on new mortgages in December was 2.69 percent, up from 2.57 percent in November.

The 0.12 percentage point increase was still lower than the rise in most other eurozone countries.

This means that Ireland retains its place as the country with the third cheapest mortgage rate in the eurozone. This is a reversal from recently when interest rates here have been consistently higher than the other 19 eurozone countries.

Malta has the lowest average rate at 1.98 percent. Latvia has the highest rate at 4.65 percent.

Central bank figures show the euro zone average was 2.95 percent in December.

This is the highest level since at least August 2017 and more than double the previous year’s level.

However, the December figures are already dated as Permanent TSB, Bank of Ireland and AIB all increased their fixed rates, with AIB also increasing its floating rates.

In January, Permanent TSB increased its fixed interest rates by 0.05 percentage points to 0.8 percentage points depending on the length of the fixed term, the size of the loan and the size of the loan relative to the value of the property.

The Bank of Ireland has now raised its fixed rates by 1 percentage point in recent months, while the AIB has raised some of its fixed rates by as much as 1.75 percentage points and last week became the first major lender to raise its variable rates.

Bonkers.ie’s Daragh Cassidy said prices are back where they were in December 2021 at 2.69 percent for last December.

And this despite the fact that the average rate in the euro zone has more than doubled over the same period.

“These figures show once again how slowly Irish banks initially passed on the ECB’s rate hikes. But that is changing now.”

He said the central bank’s figures apply to mortgages drawn in December but applied for several weeks or months beforehand.

“Someone applying for a mortgage today is faced with much higher interest rate options. The cheapest fixed rate in the entire market is now 2.90 per cent with the Bank of Ireland. However, this is a green rate and to get this you need to borrow at least €250,000 and buy a property with a BER of at least B.”

The average interest rate on a mortgage applied for today is now well over 3 percent, Mr Cassidy said.

Mortgage rates in Ireland have been around 1.3 to 1.5 percentage points above the eurozone average over the last five or six years.

Mr Cassidy said it was not clear whether this historic margin would remain or whether Irish rates would become similar to euro-zone rates.

The European Central Bank raised interest rates by half a point to 3 percent last week and promised to do the same next month.

It was the ECB’s fifth rate hike since July.

More rate hikes are on the horizon, although euro-zone inflation has fallen from over 9 percent in December to 8.5 percent in January (and 7.7 percent in Ireland).