Interest rate on new mortgage lending rises in February

Interest rate on new mortgage lending rises in February

The interest rate charged by banks on new mortgages has increased, according to the Central Bank.

It says the rate on new floating rate loan agreements – including renegotiated loans – increased by 12 basis points or 0.12% during February.

The rate is now 3.38%. This compares to the equivalent rate in the euro zone of 2.09%.

The Central Bank said Irish mortgage rates had decoupled from their traditional link to the main refinancing rate charged by the European Central Bank.

It said the rate for tracker mortgages – which account for almost half of all outstanding mortgages – was 1.04% and 1.09% for buy-to-let properties.

When renegotiations were excluded, the average rate applied to new housing loans was 4.2% by the end of February, according to the Central Bank.

Overall, the average interest rate on all outstanding loans for house purchases in Ireland, which includes existing and new lending, was 2.72% at the end of February.

The Central Bank said that since mid-2012 banks had increased the spread – the difference between what they pay for deposits and what they charge for loans.

In April 2012, the spread was 100 basis points (100 basis points is one percentage point), while in February 2015 it was 350 basis points.

The Central Bank said this reflected falling deposit rates and “the failure to reduce loan rates in line with MRO (ie ECB main interest rate) reductions”.

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