The latest data from the Central Bank of Ireland reveals a significant drop in the weighted average interest rate for new consumer loans, declining by 76 basis points to 6.72% in July. This change is largely attributed to a shift towards lower interest rate fixed-rate lending.
Consumer Loans: A Shifting Landscape
In July, the total volume of new consumer loans reached €364 million, with 59% assigned to floating rates—down from 77% in June. Compared to the same month last year, the average rate has declined by 57 basis points. The Central Bank reports that new floating rate consumer loans carried a weighted average interest rate of 7.90%, while fixed-rate loans were at 5.05%.
Deposits and Interest Rates
Household overnight deposit interest rates held steady at 0.15%, while new household deposits with agreed maturity attracted an average interest rate of 1.92%. The volume in new household deposits saw an increase, reaching €1.75 million—a 13% rise from June and 25% year-on-year.
European Central Bank’s Influence
These developments come as the European Central Bank (ECB) convenes in Berlin, with markets anticipating a 25 basis point interest rate hike aimed at curbing Eurozone inflation, which stood at 3.3% in August.
Mortgage Market Movements
Interest rates on new Irish mortgage agreements averaged 3.48% at the end of July, marginally down from June. While the Irish rates dropped, the euro area average increased by 24 basis points over the year to 3.54%. Within the Eurozone, Ireland now ranks as having the 11th highest interest rates, improving from the 12th position in June.
The majority of new mortgages (94%) in July were fixed-rate, marking the highest proportion since December 2014. The volume of new mortgage agreements grew to €1.2 billion, a 6% annual increase. Renegotiated mortgages also rose significantly, totalling €537 million in July.
Implications for Borrowers
Trevor Grant, Chairperson of Irish Mortgage Advisors, cautions borrowers about potential ECB rate hikes. He emphasizes, “There’s never been a better time to review and shop around for your mortgage. Fixing a mortgage now could be wise for those who’ve yet to do so.”
Business Lending Growth
Non-financial corporation (NFC) agreements surged to €3.5 billion in July, marking a 124% monthly increase and 231% yearly growth. Larger loans, valued over €1 million, were the main drivers.
For further details, visit Irishexaminer.com.
