Conor Carey • 27 May 2016

The Mortgage Rate Debate

A bill to give the Central Bank powers to cap mortgage rates was waived through the Committee Stage in the Dail last week.

So what will this mean for variable mortgage interest rates, if anything, in the short term?

Those of us not lucky enough to hold a tracker rate will welcome the news of a reduction in variable lending rates to bring Ireland more in line with its European counterparts. While some lenders variable rates have been reducing recently, Irish variable rate holders are paying interest rates of between 3.1% & 4.5%. This compares to approximately 2% across Europe.

Part of the reason for high variable rates is attributable to the lack of competition in the Irish Mortgage Market with the duopoly of AIB & BOI front and centre. Frank Money are currently in the process of seeking a retail credit licence from the Central Bank of Ireland. The Frank Mortgage is planning to offer rates as low as 2.8% if it obtains its licence from the Central Bank.

Some analyst’s share the Central Bank Governor Philip Lane’s belief that such a rate cap will be counterproductive in that it would serve as a deterrent to the much needed competition in the mortgage market.

Meanwhile in preparation for the rate cap &/or increased competition in the market, some lenders have been locking borrowers into medium to long term fixed rates which while the certainly seem attractive compared to current variable rates on offer, may not represent the best value for money during that period.

The real message here for those of us not currently on tracker or fixed rates is that there may be an opportunity to save money on your existing mortgage repayments. Should you wish to review your existing rate please give us a call.

Conor Carey

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