Jerry Buttimer (Cork South-Central, Fine Gael)

I thank Deputy McGrath for raising this very important issue. I am taking the matter on behalf of the Minister. As Deputy McGrath will know, the formulation and implementation of monetary policy is an independent matter for the European Central Bank, ECB. As it sought to combat excessive inflation, the ECB increased official interest rates on ten occasions, to 4.5%, in the period 2022 to 2023. However, since last summer, the ECB has reduced its official rates on eight occasions and, together with a change to the way it implements its monetary policy, this has had the effect of reducing its main official lending rate by 2.35 percentage points, to 2.15%.

Official interest rates influence the level of interest rates in the wider economy. However, other economic and business specific factors, such as the cost of funding, market conditions and contractual frameworks, will also influence the retail rates charged by individual lenders. Therefore, in a market economy, the determination of retail and business lending rates are commercial decisions for individual creditors. The Minister for Finance has no specific function or role in such decision-making matters by credit institutions or other mortgage entities, except in the case of most tracker mortgages, where the contractual terms of the mortgage provide that the interest rate will adjust in line with changes in the main ECB lending rate. The contractual provisions of other types of mortgages usually afford a greater degree of flexibility to the mortgage provider in the adjustment of interest rates. Accordingly, the determination of the initial interest rate and the contractual positions for the subsequent adjustment of the interest rate in non-tracker mortgages is a business and contractual matter for the individual lender. In the case of a fixed-rate mortgage, the contractual terms will provide that the interest rate will not adjust during the period the interest rate is fixed.

The latest publicly available data on retail mortgage interest rates, published last week by the Central Bank of Ireland, is for April 2025 and indicates that, overall, the average interest rate on new mortgages in Ireland was 3.72%. This represents a reduction of five basis points, from 3.77% in March, and is 52 basis points lower in annual terms and demonstrates a sustained reduction. The equivalent euro area average increased slightly last month to 3.34%. While acknowledging that the euro area average rate is somewhat lower than in Ireland, it is worth pointing out that the vast majority of new Irish mortgages, some 81%, are now at a fixed rate, up from 70% in April 2024. This will protect borrowers in the event of a rise in official and market interest rates, at least for the period the interest rate is fixed. In addition, the weighted average interest rate on a new fixed-rate mortgage agreement was 3.55% in April 2025, three basis points lower than in March this year and 58 basis points than in April 2024, which also makes for encouraging news for borrowers.

Regarding interest rates on an outstanding mortgage, Deputy McGrath may wish to note that at the end of March 2025 the average mortgage interest rate with banks was 3.5%. However, the national interest rate on mortgages with non-banks was higher, at 4%. In relation to variable mortgage rates, options are also available for some borrowers, in particular creditworthy variable rate mortgage borrowers who have now built up equity in their home, to look at alternative mortgage options to reduce their mortgage costs. In this context, new lenders have entered the market. This is providing more competition and, in turn, may provide better value to consumers. Other lenders are also enhancing their presence in the market, including one particular entity that is now moving to provide a fuller range of banking services to Irish financial consumers. Furthermore, established and relatively new mortgage lenders are increasing the range of their mortgage offerings and a wide range of mortgage types, with different types of interest rate product, LTV products and green mortgages now available.

While interest rates increased in the period 2022 to 2023 and were challenging for the mortgage market, the most recent reduction in mortgage rates in the past 12 months will help many borrowers. Despite the inflation rate fluctuations, the mortgage market has remained resilient over this period. New residential mortgage lending amounted to almost €12.6 billion in 2024, compared with €8.4 billion in 2020. I have a substantial further contribution to provide to Deputy McGrath and I am happy to give it to him later. I thank him for raising this matter. He is right that it is a very important issue we need to keep on top of.

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