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There is a peculiar kind of optimism that sweeps through Irish financial commentary every time our mortgage rates edge a fraction closer to the European average. You’d swear we’d just beaten Czechia (as opposed to the pain of that loss that I’m still not over) for the World Cup qualifiers the way some people carry on. The latest data shows the weighted average interest rate on new Irish mortgages sitting at 3.51 percent at the end of February, up a single basis point from January. Meanwhile the euro area average is 3.41 percent. That leaves a gap of just ten basis points — the tightest it has been since November 2023.
Now, ten basis points is nothing to write home about in the grand scheme of things. Often it is roughly the cost of a few fancy coffees per month on a typical mortgage. But context matters. A few years ago we were looking at a gap measured in the hundreds of basis points. Irish borrowers were being fleeced relative to their continental counterparts, and the banks here had every excuse in the book for why that was acceptable. Concentration risk, they said. Higher operating costs, they said. Smaller market, they said. At a certain point the excuses started sounding less like explanations and more like justifications for extracting as much as possible from a captive customer base.
What actually changed? Competition. In the past when the likes of Avant Money, Nua, Moco and in the past Finance Ireland (who have since shuttered) started putting genuine pressure on the incumbents, rates started to move. The departure of KBC and Ulster Bank from the market in 2023 initially looked like it would entrench the remaining players, but the exact opposite happened. The non-bank lenders smelled blood and the credit unions started circling. The pillar banks had to respond or watch their market share erode. It turns out that competition works. Who knew.
Variable rates are still lagging at 4.09 percent, which tells you something about how selective the competition really is. If you are on a variable rate and haven’t switched, you are effectively subsidising the more attractive fixed rates being offered to new customers. The banks love variable rate customers. They are the golden geese — reliable, predictable, and apparently allergic to comparison shopping. I have met people paying north of four percent who had no idea that rates below three and a half percent were available to them. The information asymmetry is real, and the banks exploit it with relish.
What’s really absurd is that for all of financial history, variable rates were lower, fixed rates were higher. You paid more to get a guaranteed price – but in recent years in Ireland the opposite is true. Fixed rates are cheaper. That’s because variable rates should be cheaper but reversing this means you can juice people who don’t move – because inertia is a huge issue – and you protect your back book by having people on a fixed rate.
Year on year, the average new mortgage rate is down 28 basis points, which sounds like progress until you remember that the ECB has cut rates by a cumulative 150 basis points since June 2024. Irish lenders have passed through less than a fifth of that. They are hoarding the margin, rebuilding profitability after years of low rates, and hoping nobody does the maths. Well, I have done the maths, and it is not flattering. The banks are pocketing the difference and calling it prudent balance sheet management. I would call it something rather less polite.
Ireland now ranks as the seventh highest mortgage rate in the eurozone. That is an improvement on where we were, but it still means six countries are doing better while dealing with many of the same structural challenges. Spain, with a property market that genuinely crashed and burned, manages to offer cheaper mortgage finance. Portugal, which was in an actual bailout programme, offers cheaper finance. Belgium, with a similarly small market and similar regulatory constraints, offers significantly cheaper finance. At what point do we stop congratulating ourselves for being less bad and start asking why we are not actually good?
Of course, it goes without saying that ‘rate’ doesn’t mean ‘cost’. Something that isn’t widely reported are the practices that many mortgage lenders in Europe have. For instance, in Spain you can get a great ‘rate’ but you have to have an account with the bank, and the fees that go with it can be very high, they also demand that you take out your insurances through them, something that is illegal in Ireland. So the total cost of ownership of the loan is often the same as here, they just go about doing it in a different manner and take their income from other sources that are not reflected in the mortgage rate.
The narrowing gap is welcome. Of course it is. But it reflects the mechanics of ECB pass-through more than any fundamental shift in the Irish banking landscape. Our lenders are still too concentrated, our non-bank sector is still too small, and our regulatory approach still treats mortgage lending as something slightly dangerous that needs to be contained rather than a normal part of a functioning economy. The macroprudential rules have their place, but the overall framework creates friction that gets passed on to borrowers in the form of higher costs and fewer choices.
If you are in the market right now, the practical takeaway is straightforward: shop around, consider the non-bank lenders who are genuinely competing on price, and do not assume your existing bank is giving you anything close to the best deal. The gap to Europe may be closing, but the gap between what Irish banks charge their existing customers and what they offer new ones remains a canyon. Your loyalty is not being rewarded. It is being monetised.
The trajectory is positive. I will give them that. But trajectory is not the same as arrival. We are heading in the right direction at a pace that would embarrass a tortoise, and the celebrations can wait until Irish borrowers are actually paying what their European neighbours pay. Not almost. Actually. Until that day arrives, every headline about the ‘narrowing gap’ should come with a footnote reminding readers that we should never have been this far behind in the first place.
For anyone sitting on a mortgage they have not reviewed in the last twelve months, consider this your wake-up call. The market has moved. The question is whether you have moved with it. And if your answer is that you have been meaning to get around to it, well, that procrastination has a price tag. At current rates, the difference between the best and worst deals on the market could easily be worth two hundred euro a month or more. That is two thousand four hundred euro a year you are leaving on the table. Over a five-year fixed term, that is twelve thousand euro. Still feeling patient? I thought not.
