High mortgage rates and strict mortgage regulations are greatly effecting borrowers. According to the Independent, Ireland’s high mortgage rates are costing borrowers up to €60,000.
Although Irish mortgage rates have dropped in May according to data from the Central Bank, the rate remains the second highest in all of the eurozone. The only country that has higher mortgage rates than Ireland is Greece.
The average rate on all new mortgages averaged to 3.01% in May. The rate decreased by two basis points since April. However, the average rate in the european area amounts to only 1.68%. However, in comparison to the United States, the average rate is around 3.5%. The lowest mortgage rate in the eurozone is Finland. The rate defined in Finland is less than 1%.
According to the Banking and Payments Federation, the average first time buyer mortgage is now defined as €225,000. This means that the typical first time home buyer who is borrowing €225,000 over 30 years will pay about €143 more per month for their mortgage. If the average first time was able to borrow under the eurozone average rate, they would be able to save about €1,700 every year.
For a family with a €300,000 mortgage, the difference in rates amounts to extra payments. The difference in payments from higher rates could amount to borrowers paying €60,000 more than those paying the average eurozone rate across the span of a 25 year life of the loan. According to the Chief Executive of Brokers Ireland Diarmuid Kelly noted that this figure meant that the monthly mortgage re-payment would be €200 more a month in Ireland than that of the same loan in the eurozone.
The slight fall in mortgage rates was not enough to relieve the high costs of borrowing. The high costs of borrowing combined with the tight mortgage regulations creates an extensive pressure on affordability for first time home buyers.
So, why does Ireland have such high rates? Why are the Irish paying so much more to borrow?
The mortgage rates are so high because the level of home repossessions in Ireland is extremely low in comparison to other countries in the eurozone. Generally, most banks will take back ownership of a property within the span of around a year that the loan has gone bad. Home repossessions rarely occur because of the complexity of the process and legal impediments faced by banks.