Mortgage rates in Ireland hit five-year high

Mortgage rates in Ireland have risen the most in almost 5 years.

His move is despite the European Central Bank’s hold on increasing wholesale interest rates.

Typical new mortgage rates rose 0.7pc in January, the biggest monthly gain in nearly five years.

Ireland is the second most expensive in the Eurozone after Greece, new figures from the Central Bank show.

High mortgage costs combined with a tight cost of living coupled with rising costs of gasoline, diesel, heating oil and home energy hit consumers hard.

The typical rate here for the first month of this year was 2.76pc, more than double the eurozone average of 1.31pc.

High mortgage rates are adding more than €2,200 a year to the cost of living in Ireland.

This is the annual amount that new borrowers pay in the country relative to the average cost of other Eurozone countries.

Finland once again has the lowest average mortgage rate in the Eurozone at just 0.79 points, followed by Portugal at 0.80 points.

The central bank in Dublin said the Eurozone average was 1.31 points, up from 1.29 points in December.

According to Daragh Cassidy of mortgage brokers and price comparison website, this is the first time in almost five years that the average rate in Ireland has increased by this much in a one-month period.

Financial markets have already priced in two European Central Bank (ECB) rate hikes this year, which will make the new variable, track, and fixed rates even more more expensive in this country.

But supply-side inflation and the economic shock to the global economy from Russia’s aggression in Ukraine mean an ECB rate hike this year is unlikely.

The increase in interest rates on new mortgages here is because many first-time buyers are now choosing 10- and 20-year fixed rates, which are more expensive than short-term fixed-rates.

Mr Cassidy said: “Mortgage rates have been falling slowly but steadily in Ireland over the past few years. And they continue to fall, at least for now. ”

The average rate has now increased, he said, suggesting that many first-time buyers may be choosing a more expensive, long-term fixed rate than in the past.

“This should come as no surprise as there has been talk in recent months about the ECB starting to raise rates.”

Fixed rates up to 30 years are now available in Ireland.

Mr. Cassidy said that rapidly rising property prices could also have an effect.

Lenders price their mortgage rate based on the amount of equity someone has in their home or the size of the deposit they have in relation to the loan.

This is often referred to as the loan-to-value (LTV) ratio.

The larger the down payment a homebuyer has, the higher interest rates most lenders will have.

But soaring property prices mean that buyers who were previously able to take advantage of cheaper rates for those with under 80pc LTV have now been pushed to the higher LTV range.

The average first-time buyer’s mortgage in Ireland is around €262,000.

This means that someone borrowing this amount for more than 30 years will pay almost €187 more per month, or €2,200 more a year, than our European neighbours.

Irish banks say they are forced to charge extra fees here because mortgage lending in Ireland is considered risky, in part because banks have difficulty enforcing guarantees if a loan is lost in debt.

This means that Irish banks must hold three times as much capital to protect against potentially lossy loans than banks in the rest of Europe. Mortgage rates in Ireland hit five-year high

Fry Electronics Team

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