Mortgage rates in Ireland are second highest in Europe – and about to get higher

Mortgage rates in Ireland are the second highest in the European Union, behind only Greece.

In a nutshell

New data from the Central Bank of Ireland shows that the average interest rate on a new mortgage in Ireland in April was 2.77 per cent, that’s slightly down from the 2.78 per cent in March but still the second highest in Europe.

Interest rates across the eurozone have been increasing in recent months but in Ireland they’ve remained mostly static.

Of the 19 Eurozone countries, Finland has the lowest average mortgage rate at 0.95 per cent.

Rising interest rates

The European Central Bank is expected to announce that from July, interest rates will increase by 0.25 per cent. It is widely believed that interest rates will be put up again before the end of the year.

The interest rate increase is likely to hit up to 740,000 households in Ireland.

A half a percent increase in interest rates would add €80 a month to the cost for households serving a mortgage.

Mortgages and house prices

Meanwhile the number of people getting mortgage approval is falling and two lenders have already said they are increasing their mortgage rates.

Average house prices increased by 15.2 per cent between March 2021 and 2022. In fact, property prices have been increasing steadily month on month for more than a year and a half. They are fast approaching Celtic Tiger levels.

In Dublin, property prices have risen 122.5 per cent compared with their February 2012 low.

While the supply of new houses is expected to increase, this doesn’t necessarily mean that the price of houses will go down.

This is because costs in the construction sector are increasing, according to The Housing Market Monitor from the Banking and Payment Federation Ireland (BPFI).

Rents

Rents are also still increasing. The national standardised rent level increased to €1,415 in the final quarter of last year, according to data from the Residential Tenancies Board.

Half of all countries across the country had standardised rent levels of more than €1,000. Dublin leads the pack with €1,916 but it is not alone: Wicklow; Kildare; Meath; Louth; Laois; Kilkenny; Galway; Cork; Limerick; Waterford and Carlow. Westmeath joined the list for the first time.