Why are Mortgage Rates Higher in Ireland Compared to EU ?

Mortgage interest rates for new lending are higher in Ireland than the average for other eurozone countries.

One of the reasons for higher rates cited by the Central Bank – is that there is more risk of default on mortgages in Ireland. For example – in France,  they have 3% of  loans classed as “Non Performing” .   In Germany it  is 1.87% , Spain 4.53%.  Here in Ireland the rate is much higher at 11.23% ( Figures from ECB). So the banks try to get more revenue  from mortgage payers to cover the higher general risk of non payment.

The smaller size of the Irish population also means that, compared to France or Germany ,- there is a smaller mortgage market and the lenders don’t have the same economies of scale.

There is also less competition in the Irish mortgage market – and a seeming unwillingness of EU lenders to offer mortgages here. This is probably because of the higher levels of non performing loans in Ireland which puts off new lenders . Less competition means higher rates – just because they can get away with it.

The two biggest banks in Ireland , AIB and BOI , made over € 1 Billion profit each in 2017 . 

People don’t tend to switch mortgage lenders in Ireland – even though it can be very worthwhile to switch your mortgage.

Only 8% of new Irish mortgages in 2017 were switchers (2,853 out of 35,472). Some lenders take advantage of this inertia to differentiate between new lending and old and charge higher margins on the older lending,

As you can see from our Mortgage Rate Comparison – there are rates available for new borrowers from 2.3% to 4.2% .

We need more technological innovation to reduce costs and enhance efficiency of mortgage provision in Ireland. For example, the Central Bank agrees that the proposed introduction of e-conveyancing would enhance the mortgage switching process.

We need more challengers to the mainstream banks (Like N26 for current accounts). This will  increase competition and bring down mortgage rates.