Paschal Donohoe (Dublin Central, Fine Gael)

The European Central Bank increased interest rates over the course of 2022 and 2023 as a move to combat excessive inflation. Since the middle of 2024, the ECB has reduced its main official lending rate to 2.15%. While changes by the ECB generally have a direct impact on tracker mortgage rates, reductions by the ECB are only one factor that feed into the commercial decisions made by creditors in relation to other lending rates. Other factors can include the cost of funds, risk levels, contractual terms, creditor status and market competition. As a result, mortgage interest rates can vary between creditors and customers. I appreciate this is a very difficult and sensitive matter for those who have been affected by it and have seen their loan books sold. It is important to indicate to the changes on average there have been on interest rates. At the end of March the average interest rate on outstanding mortgages held by banks was 3.5%, down from 3.67% a year earlier.

For the non-bank sector, the average was 4%, down more than half a percentage point from 4.51% a year earlier. For entities in the non-bank sector that do not engage in new lending, the average was 4.57%, down almost a full percentage point from 5.5% a year earlier. These reductions are welcome, and it is expected all mortgage creditors will continue to keep their lending rates under review. It is my clear view that where mortgage rates have in the past increased in line with ECB increases, they should now, in this new interest rate environment, also appropriately adjust downwards. The Central Bank will continue to monitor the level and distribution of interest rates in the mortgage market.

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