BY JOHN ELLIS, FINANCIAL ADVISOR
Another interest rate cut from the European Central Bank (ECB) may sound like welcome news for mortgage holders but for those looking for a new home in Kilkenny and across Ireland it’s not all good.
Despite ECB Governor Christine Lagarde’s previous comments that rate reductions might slow, escalating global tensions, most notably trade threats from the US, have renewed fears of a European recession. In response the ECB announced a further 0.25% rate cut, its seventh since last June, bringing the main lending rate down to 2.4% from 4.5% just a year ago.
The immediate winners are the 126,000 tracker mortgage holders. For every €100,000 owed they will save about €13 a month. A household with a €250,000 loan will now be paying approximately €33 less each month. Even those with smaller balances, around €150,000, are seeing monthly repayments drop by €150 yearly compared to 12 months ago.
It is not all good news though. While falling ECB rates may suggest relief for all borrowers the connection is not straightforward. Variable-rate mortgage holders and those tied to so-called ‘vulture funds’ may eventually see reductions but experts warn this will not be immediate nor guaranteed.
Financial advisors caution that Irish banks often price in predicted cuts ahead of time. While trackers respond directly to ECB movements, fixed and variable rates are influenced by broader market strategy. Notably, fixed mortgage rates under 3% may become available by mid-year but those coming off older more favourable fixed rates might still see an increase in monthly costs unless they switch providers.
For first-time buyers and young families falling mortgage rates are little comfort in the face of soaring house prices. New figures from the Central Statistics Office (CSO) show national property prices are now nearly 20% above their pre-crash 2007 peak. The average national house price has reached €359,999 with prices in Kilkenny and the wider south east up 8% year-on-year.
Housing stock remains “stubbornly limited”. In February alone house sales dropped 14% from the previous month but this has done little to halt rising prices. The simple equation of high demand and low supply continues to drive up costs, particularly outside Dublin where the rise is even more pronounced.
With Irish borrowers still paying among the highest mortgage rates in the eurozone, the onus is on prospective homeowners to search for the best deals. Industry experts strongly encourage those looking to use a mortgage broker and explore all available lenders especially as competition among banks begins to rise again.
But the bigger question remains, will policymakers finally act to address the root causes? Trevor Grant of Irish Mortgage Advisors says it plainly, if the housing crisis is to be solved “the new Housing Minister must deliver an exponential increase in home building”.
Without more supply price growth will continue to rise no matter how low interest rates go and for future homeowners the message is clear, secure the best deal you can.
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