Bank­ing ‘du­op­oly’ is keep­ing mort­gage rates high

Irish Independent - - News | Housing - Char­lie We­ston

THE lack of com­pe­ti­tion in the bank­ing mar­ket has been blamed af­ter new fig­ures showed mort­gage rates here re­main the high­est in the eu­ro­zone.

The Cen­tral Bank data shows that home buy­ers are pay­ing mul­ti­ples of what is be­ing charged in other coun­tries in the euro area.

It comes af­ter Eu­ro­pean Cen­tral Bank pres­i­dent Mario Draghi, speak­ing in Dublin, blamed a “quasi-monopoly” among banks here for the high rates. AIB and Bank of Ire­land dom­i­nate the mar­ket.

Ac­cord­ing to the Cen­tral Bank, the av­er­age in­ter­est rate is­sued on a new mort­gage in Septem­ber was 3.08pc.

Although low for Ire­land by his­tor­i­cal stan­dards, this com­pares to an av­er­age rate of just 1.76pc across the eu­ro­zone.

“Ire­land con­tin­ued to have the high­est av­er­age in­ter­est rate across the euro area on all new mort­gages agreed in Septem­ber, at 3.08pc. The rate var­ied con­sid­er­ably across

coun­tries, with the av­er­age for the euro area be­ing 1.76pc,” the Cen­tral Bank said.

The high rates are com­bin­ing with a scarcity of prop­er­ties to buy to price new buy­ers out of the mar­ket, ex­perts said.

Cal­cu­la­tions based on the Cen­tral Bank fig­ures mean a typ­i­cal new buyer is pay­ing €157 more for their mort­gage each month com­pared with the av­er­age in the eu­ro­zone.

Over a year this works out at al­most €1,900 more be­ing paid here by a typ­i­cal new bor­rower than in the rest of the euro cur­rency area, ac­cord­ing to cal­cu­la­tions by price com­par­i­son site Bonkers.ie.

Daragh Cas­sidy, of Bonkers. ie, said that de­spite the re­cent rate re­duc­tions from some of the main banks, first-time buy­ers in Ire­land con­tinue to pay far more for their mort­gage than buy­ers in any other coun­try in the eu­ro­zone.

Cen­tral Bank of Ire­land gover­nor Philip Lane said a uni­fied bank­ing sys­tem across Eu­rope would cre­ate an op­por­tu­nity for more for­eign banks to en­ter the Ir­ish mar­ket.

This would al­low for a re­duc­tion in in­ter­est rates.

He said there was lit­tle pres­sure on banks here to re­duce in­ter­est rates due to the small num­ber of lenders.

Philip Lane, gover­nor of the Cen­tral Bank

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