The amount borrowed for mortgage loans 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’s latest retail interest rate figures show the total value of new mortgage agreements in June was 6 per cent lower than in the same last month year, at €808 million. The figure was also down 2 per cent on May lending.
Across all mortgages, the weighted average interest rate on a home loan in the Republic in June was 4.11, down 0.6 percentage points from May, and the lowest level in nine months. It was still 36 basis points (0.36 of a percentage point) higher than the 3.75 per cent average mortgage interest rate across the euro zone, the Central Bank reported.
The proportion of home buyers opting for fixed-rate loan contracts increased to 70 per cent from 66 per cent in May, as the average interest rate charged on new fixed-term mortgages fell by 0.7 of a percentage point to 3.95 per cent.
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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 ultimately lowered its key lending rate from a record 4.5 per cent to 4.25 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 the Association 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.”
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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, but still behind the 3.03 euro zone average.
The rate on overnight deposits, where Irish savers hold the vast majority of their money, stayed at 0.13 per cent, around one-third of the euro-zone average.
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The Central Bank said about €1 billion moved into higher interest term deposits in June. That is in line with the May figure, but more than double the amount that was moving to accounts offering better interest at the same time last year. About €120 billion of the €138 billion of cash that households have with banks in Ireland remains in overnight or demand deposit accounts, earning practically no interest.
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