Interest rates on new mortgage agreements crept up again in March to reach the highest level since 2017, but they may be close to hitting a peak amid changing conditions.
Figures from the Central Bank showed the average interest rate on new Irish mortgage agreements rose to 4.31%, representing a two basis-point jump on the previous month and the third consecutive monthly increase.
Meanwhile the average rate on a home loan in the eurozone fell eight basis points to 3.84% during the same period.
“The gap between the average rate in Ireland and the eurozone continues to widen. However, this hopefully marks the peak of mortgage rates in Ireland for now,” said Daragh Cassidy, head of communications at mortgage price comparison site bonkers.ie.
Lenders in the retail banking market in the Republic have benefitted from a campaign of interest rate hikes introduced by the European Central Bank (ECB) but they may come under pressure to offer more attractive rates in the coming months as fresh competition enters the market and customers coming off fixed-rate contracts shop around.
Spanish financial service provider, Bankinter, which operates Avant Money, said it is applying for a full Irish banking licence and entering the deposit market.
Meanwhile, the ECB are expected to announce at least one rate reduction before it breaks for the summer in August.
“We’ve seen interest rate cut expectations scaled back quite dramatically in the US and Australia for example. But at present it still seems highly likely that the ECB will cut rates at least more than once this year,” said Mr Cassidy.
Since the start of the year there has been a frenzy of activity among lenders currently operating in the market to swell their loan books further.
AIB cut mortgage rates on its so-called ‘green’ offering across all its brands including EBS and Haven for customers with more energy efficient homes while Bank of Ireland tweaked its similar offering.
Meanwhile, PTSB cut its four-year fixed-term mortgages for the second time since last December.
“These lower rates should feed through into the figures over the coming weeks,” said Mr Cassidy.
Meanwhile, a separate report found many house hunters are prepared to sign mortgage agreements before interest rate reductions are implemented as homebuyers are not confident that conditions in the residential property market will improve next year.
A consumer sentiment survey by property website MyHome.ie suggested some homebuyers may be rushing to secure agreements as demand continues to outpace chronically low housing supply.
The report also showed some consumers are more financially prepared to buy a home than others.
Nearly half of the respondents said that the cost-of-living crisis has forced them to postpone a housing purchase, however they may become priced out of the market. The majority of respondents said they believe the price of homes will increase in the next year.