Mortgage rates near Eurozone’s highest...but experts say get a fixed loan deal now

MORTGAGE-holders were urged yesterday to fix their deals at current low rates after a warning interest rates may rise ‘within the next 12 months’.

This is despite Ireland currently having the second-highest average rates in the Eurozone, after Greece, of 2.74% – more than double the Eurozone average of 1.27%.

The overall average includes variable rates, which at 3.31% has pushed up the overall rate. Once variable rates are excluded, the average fixed rate is 2.62%.

Fixed-rate mortgages now account for 80% of new home-loans, and experts yesterday told homebuyers to grab fixed deals now while at record lows.

Inflation overall in the Eurozone is 3.4% – way above the ECB’s target of ‘below, but close to, 2%’ – leading to warnings rates may rise. The current Irish inflation rate is above the target, too, at 2.8%. Trevor Grant, of the

Association of Irish Mortgage Advisors, warned yesterday: ‘Based on current inflation figures, a rate increase is possible within the next 12 months. However, nobody can accurately forecast interest rates and the current rising inflationary trend may reverse within the next six months or so, and either way competition in the market is likely to remain strong. Only time will tell.

‘Our advice is that insofar as you can, you should set your mortgage rate at a level and term you are comfortable with and not expose yourself to any unwanted future rate increase, which might put you under financial pressure in the future.’

Irish Mortgage Holders Organisation chief David Hall, who said he has just fixed his own mortgage for five years, said: ‘There’s definitely an undercurrent there, a risk there, of an interest rate rise. No one knows for definite but there’s still a risk there.’

He advised people to ‘make some enquiries now, to fix at these low rates is a good idea. There’s a lot of uncertainty post-pandemic, if you’re into taking a bit of risk that’s fine, if you’re not then fixing’s for you. ‘No one knows if they’ll go lower, but there’s less competition now as well. Two of the larger players exited the market and that doesn’t help,’ he said.

The ECB was signalling to the market rate rises maybe coming but ‘that does not mean it will’, said expert Karl Deeter, of Irish Mortgage Brokers. ‘All the good rates in the market now are fixed anyway, so if you get a mortgage you’re going to be fixing. That being the case, pick the best rate and you can’t go too far wrong.

‘We also have really compelling 20-year fixed rates at the moment. No one knows the future of inflation, markets can give indications of it – 18 months ago, interest rates were negative but that changed.

‘But you can get a really good price for 20 years at the moment, Finance Ireland and Avant Money have those rates so they should be in the mix of things you consider.

‘If the best deal is a fixed rate and a fixed rate is the way to protect yourself in the future, then you kill two birds with one stone,’ he added.

Brokers Ireland director of financial services Rachel McGovern advised: ‘Interest rates are historically low and with the recent advent, for the first time, of

‘Pick the best rate and you can’t go far wrong’

attractive and genuinely long-term fixed interest rates of up to 20 and 30 years, those taking out mortgages now can have a strong level of security knowing what their future financial outgoings will be.’

She advised all mortgage holders to review their mortgages and, if in doubt, to seek impartial advice. ‘While there is no immediate prospect of an interest rate rise with positive soundings from the ECB, we simply don’t know when rates will rise and the turn often surprises,’ she added.

The volume of new mortgages was €704million in August, a 50% increase on August last year as lending bounced back from the Covid lockdown, and a 2% decrease compared with July.

However, the average interest rate on savings was just 0.1% in August which is less than half the 0.22% average in the rest of the Eurozone.