Interest Rates – Mortgage Holders Paying Over and Above European Counterparts

Tue Apr 14 2020

Commenting on last week’s Central Bank report on retail interest rates for February, Brokers Ireland said
Irish mortgage holders are paying 1.56pc over and above their euro area counterparts, which is costing them over €236 more every month on a €300k mortgage over 30 years and a massive €85,100 over the lifetime of the mortgage (See example below).

Rachel McGovern, Director of Financial Services at Brokers Ireland which represents 1,250 Broker firms, said: “While Irish rates have come down over recent times, this is still an enormous gap, with little justification for it.”

“Today’s report also shows that 76pc of all new mortgage agreements in the three months to February are fixed rate mortgages, a new high. This has been an increasing trend and evidence that consumers are looking for security in their financial planning. While the Covid-19 pandemic can be expected to slow the mortgage market for the near future none of us know with any degree of certainty the full impact over the medium to long-term with regard to interest rates.  What we would say is that people need to consider their decisions very carefully and take advice.”

She said there is huge untapped value for consumers still to be got in switching between lenders.

“Not enough people are shopping around. By doing so you can substantially reduce your repayments or force a better rate from your existing lender,” she said.

And she said Irish mortgage holders still do not see the kind of good value long-term fixed interest rates that are available in other European countries, rates for periods beyond 10 years, for terms of 20 years or for the lifetime of a mortgage.

“Irish consumers are losing out on every front, paying unjustifiably high interest rates and not having better euro area type mortgage products that enable people to plan their financial futures with confidence,” she said.

Ms McGovern has said this is not just bad for consumers, it is ultimately bad for lenders too because over time consumers are likely to migrate to or find newer developing forms of borrowing.

“The money foregone by Irish borrowers also represents a lost opportunity for this money to be used by consumers for other critical financial planning needs, such as pension planning or children’s education.  Already we’re seeing consumers fearful about their futures with some having to stop their pension contributions for the moment.”

She said mortgage holders can benefit from rising house prices of recent years with an improved loan-to-value (LTV) ratio.

“Most lenders offer a lower interest rate where there is a better LTV ratio. But consumers need to be proactive in seeking out a better rate from their lenders. Now more than ever consumers need to seek the advice of a broker,” she said.



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