Irish Mortgage Interest Rates Drop to Lowest Level in Over Two Years in May

Irish mortgage interest rates fell to their lowest rate in over two years in May, according to new figures from the Central Bank. The average rate for the month was 3.66% on new mortgages, which was down slightly on the April rate of 3.72%, and over half a percentage point lower than for May 2024 - when the average interest rate was 4.17%. May's figure was the lowest rate since April 2023.

However, Irish mortgage rates are still significantly higher than the euro zone average of 3.32% - although the gap has narrowed. Irish rates are now the eighth highest of all countries that use the euro. Latvia has the highest average mortgage rates at 4.29%, while Malta has the lowest at 1.8%.

The sustained fall reflects successive reductions in European Central Bank interest rates. Since September 2023, the ECB has cut its main interest rate eight consecutive times, bringing it from 4% down to 2%.

According to the Central Bank, the total volume of new mortgage lending in May was €943m, which was a €39m - or 4.3% - increase on the previous month, and was €122m (15%) higher than May 2024.

Commenting on the figures, Daragh Cassidy from Bonkers.ie said the reduction in rates \"is obviously good news for prospective first-time buyers and those looking to switch their mortgage over the coming months\". \"Although the ECB is expected to keep rates on hold at its next monetary policy meeting on 24 July, it will likely cut rates one more time before the end of the year, meaning mortgage rates should creep slightly lower over the coming months,\" Mr Cassidy said.

\"But the 3.66% average rate really is just that - an average. There are ten lenders in the Irish mortgage market at present and there's a wide variation in rates across them all. And different lenders offer different cashback deals and incentives, which also need to be taken into account,\" he said.

\"For example, a variable rate as low as 3.18% is available right now for a standard first-time buyer with Avant Money’s new tracker-like mortgage product,\" he said. \"But it's 4.15% with AIB. For someone borrowing €300,000 over 30 years, that's a difference of over €164 a month or almost €2,000 over just one year. And if you went with the most expensive variable rate on the market, which is 4.70%, you’d end up paying over €261 more each month. It’s a huge difference,\" he explained.

\"I'd really encourage consumers to compare the market and shop around when applying for a mortgage - either as a first-time buyer or switcher. A good broker will help you find the best rates for your particular circumstances,\" he added.

Meanwhile, Senior Mortgage Advisor of NFP Ireland Fiona McMahon said \"while it's encouraging to see movement, Irish borrowers are still paying significantly more than many of their European neighbours, despite recent ECB action aimed at easing borrowing costs\". \"The ECB recently cut rates for the eighth time since June 2024. This shift has prompted some lenders to respond, notably Avant Money, which became the first to reintroduce mortgage rates under 3% since 2022. However, that kind of competitive pricing remains the exception, not the norm,\" she said.

\"We’re still seeing a cautious stance from many banks, particularly when it comes to passing on reductions to variable and fixed rate customers,\" she noted. \"Their rationale that they didn’t raise rates as aggressively during the last cycle, may hold technically, but it offers little comfort to homebuyers currently grappling with record-high property values and limited supply,\" she added.