Mortgage Lending Rates – Lack of Competition Keeping Rates Excessive

Tue Oct 13 2020

Current differential costs Irish consumers  in excess of €80,000 more on a €300k mortgage over 30 years than in euro area

As today’s Central Bank’s retail interest rates for August reveal a continuing wide gap between Irish and euro area mortgage holders, with Irish consumers paying 2.83pc compared with1.35pc on average across the euro area, a differential of 1.48pc, Brokers Ireland said there is not enough competition in the Irish mortgage market and Irish consumers may have to wait until they can access mortgages across EU borders before we’re likely to see strong competition.

Rachel McGovern, Director of Financial Services at the organisation, which represents 1,225 Broker firms, said: “In this regard it is to be welcomed that Mairead McGuinness, ratified today as the new EU Commissioner for Financial Services, Financial Stability and Capital Markets Union has committed to prioritising Banking and Capital Markets Union during her term.

“It will be no easy task but we wish her well,” she said.

She said the impact of the Covid-19 pandemic is evident in today’s figures with new mortgage agreements in August being down 38pc on the same month in 2019.

“The pandemic has impacted many areas of the market, including the fact that lenders have become more risk averse,” she said “However demand for mortgages remains strong and will continue since there is huge pent-up demand.”

The differential whereby Irish mortgage holders are paying 1.48pc more than the euro area average is costing Irish consumers  €80,481.60 on a €300k mortgage over 30 years. (See chart below for further detail on mortgage and SMEs loans and the impact of the differentials).

“In the short-term the best advice we can offer consumers is to shop around and not be afraid to switch lenders.

“Since your mortgage is likely to be your steepest outlay financially there are substantial savings to be achieved with some lenders even offering incentives to switch. And it is easier now than it was some years ago. If in doubt contact a Broker,” she said.

Ms McGovern said interest rates for SMEs were even worse than those for mortgage holders. “The SME situation is far worse, with Irish SMEs borrowing amounts up to €250k having to pay an excess of over 3pc on their counterparts in the euro area,” he said.

In today’s Central Bank figures Irish SMEs are paying 5.03pc on new loans with SMEs in the euro area in general paying a substantially lower 1.90pc.

“That is a ginormous difference for which it is difficult to see any rationale. We need a vibrant SME sector now more than ever,” she said.

Below: Comparisons between Ireland and the euro area average for SME loans and for mortgages.



RateLoan AmountTermRateMonthly PaymentAnnual PaymentOverall Payment
Ireland€ 300,00030 years2.83€ 1,237.47€ 14,849.64€ 445,489.20
Euro Area€ 300,00030 years1.35€ 1,013.91€ 12,166.92€ 365,007.60
Difference001.48€ 223.56€ 2,682.72€ 80,481.60
RateLoan AmountTermRateMonthly PaymentAnnual PaymentOverall Payment
Ireland€ 250,00030 years2.83€ 1,031.23€ 12,374.76€ 371,242.80
Euro Area€ 250,00030 years1.35€ 844.92€ 10,139.04€ 304,171.20
Difference001.48€ 186.31€ 2,235.72€ 67,071.60



RateLoan AmountTermRateMonthly PaymentAnnual PaymentOverall Payment
Ireland€ 100,0005 years5.03€ 1,888.50€ 22,662.00€ 113,310.00
Euro Area€ 100,0005 years1.9€ 1,748.40€ 20,980.80€ 104,904.00
Difference003.13€ 140.10€ 1,681.20€ 8,406.00
RateLoan AmountTermRateMonthly PaymentAnnual PaymentOverall Payment
Ireland€ 50,0005 years5.03€ 944.25€ 11,331.00€ 56,655.00
Euro Area€ 50,0005 years1.9€ 874.20€ 10,490.40€ 52,282.20
Difference003.13€ 70.05€ 840.60€ 4,372.80


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