Irish mortgage rates have fallen to their lowest level in over a year, according to the latest data from the Central Bank of Ireland. The average mortgage rate in Ireland dropped to 4.08% in September, down from 4.11% in August. This marks the lowest level since the summer of 2023.
The decline in mortgage rates is part of a broader trend across the Eurozone, where the average new mortgage rate has fallen to 3.59%. However, rates vary significantly across the region, with Malta offering rates as low as 1.76% and Latvia as high as 5.28%.
The European Central Bank (ECB) has played a crucial role in this trend, having cut interest rates multiple times this year. Another rate cut is expected next month, which would be the fourth of the year. Daragh Cassidy, Head of Communications at Bonkers.ie, noted that Irish mortgage rates are now almost a quarter of a point lower than their recent high at the start of the year.
Cassidy predicts that further ECB cuts will continue to drive down mortgage rates in Ireland over the coming months. He expects the average rate to fall below 4% by early next year, a level not seen since the spring of 2023.
While falling mortgage rates are good news for borrowers, they pose challenges for savers. Cassidy pointed out that deposit rates are likely to start falling as well. Online banks like Revolut and N26 have already cut their rates, although the main Irish banks have yet to follow suit.
Irish households currently have over €150 billion on deposit, with most of this money in accounts that pay little to no interest. Cassidy advises savers to lock in higher rates while they are still available.
The competitive landscape among mortgage lenders is also contributing to the downward trend in rates. Avant Money has reduced its rates and introduced a cash-back offer across all its mortgage products. AIB has launched lower-cost green mortgages, further intensifying competition.
The Central Bank’s figures show that the total volume of new mortgage agreements increased from €851 million in August to €930 million in September, marking a 9% monthly increase and a 30% rise from the same time last year. Meanwhile, interest rates on household overnight deposits remained at 0.13% in September for the ninth consecutive month. The weighted average interest rate on new household deposits with agreed maturity increased slightly to 2.63% in September, compared to the Eurozone average of 2.98%.
The ECB’s interest rate on its main refinancing operations is expected to fall from 4.5% to 4.25%, with the rate on its marginal lending facility at 4.5% and its deposit facility rate at 3.75%. These changes are anticipated to take effect from December, following ten consecutive rate hikes since 2022.
As mortgage rates continue to fall, Cassidy predicts that we could see rates as low as 3% available, although these come with several caveats. He also mentioned the possibility of sub-3% mortgage rates returning to the market by 2025.
In summary, the recent decline in Irish mortgage rates, driven by multiple ECB rate cuts and increased competition among lenders, offers significant benefits for borrowers. However, it also presents challenges for savers and potential risks for the property market. As the ECB is expected to continue cutting rates, the trend of falling mortgage rates is likely to persist into the next year.
