Mortgage rates have been steadily on the rise over the last year as central banks grapple with high inflation. Despite a gradual decline, inflation remains stubbornly high, prompting another expected increase in the European Central Bank (ECB) refinancing rate. Currently at 3.5%, the rate that affects tracker mortgages is expected to climb to 4% this week, with potential to reach 5% in the coming months. As a result, mortgage repayments for a €200,000 tracker mortgage are anticipated to rise by €648 per year. Since July 2022, mortgage repayments have increased by €4,140 per year on the same loan, and variable and new fixed-rate customers are likely to see an increase from banks and mortgage lenders. To ensure the best deal, it is crucial to shop around as the difference between Ireland’s highest and lowest mortgage rates is significant. Some Irish mortgage lenders have new rates as high as 7% or 8%, while others are as low as 3.5%. Those seeking new mortgages and those coming off fixed-rate mortgages this year should consult with an independent mortgage adviser to explore their available options.
Irish property prices may be affected by these rising mortgage interest rates. According to Daft.ie’s latest House Price Report, property prices fell by 0.3% in the first three months of 2023, the biggest drop since 2012, with the exception of the Munster region where they rose by 0.6%. Despite this, rising mortgage rates are not the only factor affecting property prices; the Central Bank of Ireland has increased the amount that home buyers can borrow to up to four times their income. Additionally, there is still a lack of supply in the property market. As a result, despite growing mortgage rates, property prices are expected to remain stable for the time being.
In the first quarter of 2023, there has been a slowdown in mortgage drawdowns, with numbers from the Banking and Payment Federation showing a 30% reduction compared to the final quarter of 2022. This decline is attributed to a decrease in switcher mortgages due to rising interest rates. However, overall home-buyer figures are positive, with volumes reaching their highest Q1 levels since 2007 and 2008. Although mortgage holders may face more difficulty in 2023 due to interest rate increases, it is hoped that central banks will be able to manage high inflation, possibly levelling off or even reducing mortgage interest rates in 2024.
