The average interest rate on new Irish mortgages fell to 3.8% in December, marking the lowest level since April 2023, according to the latest figures from the Central Bank of Ireland. The decline continues a downward trend, with rates easing from 3.97% in November.
While mortgage rates in Ireland remain above the euro area average, which fell by eight basis points to 3.35%, the gap between Irish rates and the eurozone average narrowed to 45 basis points, down from 54 basis points the previous month.
Despite the improvement, Ireland still recorded the seventh highest mortgage rates in the euro area. Estonia and Italy had the highest rates, while Greece and Slovenia reported the lowest.
Mortgage Lending Rises as Rates Fall
The total volume of new mortgage agreements surged to €1.2 billion in December, reflecting a 13% increase from November and a 19% rise compared to December 2023. The lower interest rates, combined with expectations of further cuts, could provide a boost for homebuyers and those looking to refinance.
Rate Cuts Expected to Continue in 2024
Trevor Grant, chairperson of Irish Mortgage Advisors, expects the downward trend in mortgage rates to persist throughout 2024, driven by the European Central Bank’s (ECB) recent rate cuts.
The ECB’s key lending rate—which influences tracker mortgages, variable rates, and fixed-rate loans—is now at 2.9%, its lowest in two years.
“Sub-3% mortgage rates could become a reality for many Irish borrowers from this summer, depending on how quickly lenders cut their rates following last month’s ECB rate cut and any future ECB rate cuts this year,” Grant said.
Looking ahead to 2025, Grant believes mortgage rates could drop to 2.5% or lower if the ECB continues its monetary easing policy.
Potential Mortgage Price War?
Falling ECB rates could also benefit non-bank lenders, which depend on wholesale funding rather than deposits. This could intensify competition in the mortgage market, potentially triggering a mortgage price war.
“There is already evidence that this is happening,” Grant said. “Non-bank lender Núa Money has just announced mortgage rate cuts, and we expect others to follow.”
Some traditional bank lenders, including MoCo, Permanent TSB, and Bank of Ireland, have also reduced their mortgage rates in recent months, signaling a more competitive lending landscape.
With lower rates and increased lending activity, 2024 could bring significant savings for homeowners and improved affordability for first-time buyers, as the Irish mortgage market continues to evolve.