BY JOHN ELLIS, FINANCIAL ADVISOR
As I write I discovered that tonight, August 19, we will witness a rare event – a blue moon. In another rare turn of events, Irish banking customers are currently witnessing there own ‘blue moon’ event – a shift in both mortgage and deposit rates. The average mortgage rate in Ireland fell to 4.11% in June, marking the third consecutive month of decline. At the same time, deposit rates have reached their highest level in more than 15 years, offering savers an opportunity to maximise returns.
However, these trends may not last long, making it essential for both potential homeowners and savers to act quickly.
The average mortgage rate in Ireland dropped from 4.17% in May to 4.11% in June. While this may seem like a minor reduction, it represents a significant trend in the context of rising costs and housing demand. The rate is now at its lowest in 10 months, providing some relief for prospective buyers. However, it’s important to note that, despite this drop, Irish mortgage rates remain above the Eurozone average of 3.75%.
This downward trend in mortgage rates could encourage more people to enter the housing market. But as Trevor Grant, Chairperson of Irish Mortgage Advisors, points out, the fall in interest rates may not be as significant as some would hope. The European Central Bank (ECB) has signalled that further cuts to interest rates may be on hold, particularly if inflation in the Eurozone continues to rise meaning that, while mortgage rates might continue to decline slightly, they are unlikely to return to previous very low rates.
Even if the ECB does cut rates further, the reduction may not fully translate to lower mortgage rates in Ireland. Banks in Ireland have not increased mortgage rates in line with ECB hikes, partly because they are trying to improve returns for their savers. Therefore, while the current lower rates might benefit those looking to secure a mortgage now, this window of opportunity could be short-lived.
Deposit rates have been edging upward, reaching an average of 2.75% in June — the highest since December 2008. This presents a golden opportunity for savers, especially given that the Eurozone average deposit rate is slightly higher at 3.03%.
With Irish households holding over €150 billion in deposits, many of which are in low or no-interest accounts, now is the time for savers to act. Moving funds to accounts offering higher interest rates could significantly boost returns. Banks like AIB and Bank of Ireland are offering rates of up to 3%, while online platforms such as Raisin are offering even higher rates of up to 3.60%.
However, this situation might not last as some institutions, like the German online-only bank N26, mentioned in a previous article, have already begun lowering their savings rates, signalling that others may follow soon. As mortgage rates continue to ease, deposit rates could begin to drop, potentially erasing the gains seen in recent months.
Prospective homeowners need to remain proactive. With mortgage rates currently low, now might be a good time to lock in a favourable rate, but it’s crucial to shop around and seek advice from mortgage brokers who can help navigate the best deals available.
For savers, the message is clear: take advantage of the high deposit rates while they last. Whether it’s switching to a different account or locking in a rate for a fixed term, there are options to ensure your savings are working as hard as possible for you.
086 8362633
