Mortgage rates hit a six-year high before price war broke out

Mortgage rates rose in March, just before a string of banks started to cut their rates in what has been described as a mortgage price war.

Rates across the market rose for the third month in a row in March with the average at 4.31pc, according to the latest data from the Central Bank of Ireland.

This is a high going back over six years since the regulator began to publish detailed mortgage rates.

Ireland had the sixth highest rates in the Eurozone in March.

Rates varied hugely across the currency bloc, from as low as 1.96pc in Malta to as high as 6.16pc in Latvia.

The Eurozone average fell for the fourth month in a row to 3.84pc.

This meant that the gap between Irish and Eurozone rates is now at its widest level since July 2022.

Last month a string of lenders cut rates, and increased the incentives for people to switch to them.

Avant Money cut all its lending rates, while its parent Bankinter is set to establish a full banking operation in Ireland.

It is reducing its mortgage rates by up to 0.45 percentage points.

It is also introducing a cashback offer worth 1pc of the mortgage being drawn down for a limited period to entice switchers.

The incentive would amount to €4,000 on a €400,000 mortgage.

AIB, EBS and Haven also upped the cash incentive for switchers from €2,000 to €3,000.

And Bank of Ireland has introduced a range of discounts on its fixed rates for those with BER of any kind, not just B3 or better. It also introduced a new flat variable rate rather than a range of variable rates.

And PSTB has cut some of its fixed rates.

Moves to cut mortgage rates come ahead of an expected European Central Bank (ECB) rate cut next month.

The latest cuts came at a time when there has been a significant slump in the number of mortgages being drawn down, despite strong demand from first-time buyers for home loans.

A slowdown in switching has led to a 20pc drop in the number of mortgages drawn down in the first three months of this year compared with the same period last year.

Daragh Cassidy of mortgage broker Bonkers.ie said the Central Bank’s data for March showed that mortgage rates in this country in that month were at their highest level since August 2017.

“And 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.”

Mr Cassidy said that in recent weeks AIB, EBS and Haven have all cut their green mortgage rates. And PTSB cut its four-year fixed rate for the second time since December.

Bank of Ireland has introduced a new, flat variable rate of 4.15pc for all customers, regardless of the loan-to-value ratio.

Previously it was as high as 4.75pc in some cases.

“These lower rates should feed through into the figures over the coming weeks. Avant Money has also cut its rates however the lender isn’t included by the Central Bank in the data at present,” Mr Cassidy said.

He said that from next month it is almost guaranteed that the ECB will start cutting interest rates. How aggressively the ECB cuts rates will depend on how fast inflation falls.

“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,” he said.

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