Mortgage drop...but neighbours pay less

THERE was some good news for struggling homeowners yesterday after interest rates dropped – but Irish mortgage holders are still paying a great deal more than our European neighbours.

The latest figures from the Central Bank show a first-time buyer borrowing €300,000 over 30 years pays €195 a month more than the European average.

Rates in Ireland stood at 3.03% in December, the latest date for figures, and only Greece had a higher rake at 3.52%.

Both are well ahead of the European average of 1.77%, while Finland has the lowest rate of all at 0.78%.

This means the average Irish first-time buyer pays €1,269.67 a month compared to the €1,074.67 European average, while in Finland they pay just €934.90.

However, there has been a slight drop here. The rate on new variable mortgages was 3.27% in December, a fall from 3.28%, while the fixed-rate average also dropped, from 2.94% to 2.93%.

Fixed-rate mortgages now account for 68% of all new agreements, the Central Bank also said.

Daragh Cassidy, of price comparison website Bonkers.ie, said falling mortgage rates are ‘obviously welcome’ but added that ‘we shouldn’t lose sight of the fact we pay higher rates than every other country in the eurozone apart from debtridden Greece’.

He added: ‘In light of this I’d call on the banks to continue to focus on reducing their rates and offering better value to consumers.

‘For those who already have a mortgage they should always look at their options for switching. New business rates are as low as 2.3% with Ulster Bank now, meaning someone who switches a €250,000 mortgage could save around €250 a month if they’re currently on a 4.5% variable rate.’

Sinn Féin unveiled its draft ‘No Consent, No Sale’ Bill last month, and the Central Bank has already warned that it could prompt an increase in interest rates and cause financial stability risks for the State.

Brokers Ireland yesterday echoed those concerns, saying the Bill would prevent ‘much-needed’ competition in the banking sector. It said that the recent narrowing of the mortgage rate gap between Ireland and the eurozone ‘could come to a halt’.

‘While we’re still 1.26% ahead of the euro area average, with less attractive longterm mortgage products by comparison with many of our European counterparts, it is important to acknowledge that there have been improvements over the last year or so,’ said Brokers Ireland director of financial services Rachel McGovern.

‘While this message may be unpopular for politicians to articulate in an environment where the tracker mortgage scandal gets yet deeper, nonetheless, it is something we would implore them to consider very carefully, in the interest of mortgage holders and those wishing to get their first mortgages,’ she added.

Homeowners here pay €195 a month more

HOW would you feel if the Government hiked your income tax by €2,400 a year? Pretty militant, probably, but that is exactly what is happening to homeowners paying mortgage interest rates in excess of the European average. A new study shows that those paying back €300,000 over 30 years are coughing up 3% interest when the average in the Eurozone is 1.77%, a rate difference that adds almost €200 per month to the repayments.

This must be addressed at European level. There is supposed to be free movement of goods and services, and Irish home buyers should be able to approach German or French banks for mortgages without those entities being compelled to open subsidiaries here.

There is absolutely no valid reason why that should not be the case, and it must happen to ensure fairness.

We have heard a lot about European fraternity in the last two years, and ensuring a level playing field for all would provide manifest proof that it exists.