In recent years, we’ve seen Irish mortgage interest rates rank among the highest in the EU, and at times, even be the highest. According to the most recent October reports from the Central European Bank, Ireland now has an average mortgage rate of 2.73%. This puts Irish mortgage rates as the second highest in the EU, right behind Greece. In 2020 Irish mortgage rates were even higher, at 2.83% (as of August 2020), while U.K. average mortgage rates during the same time period were 1.92%. Comparing Irish rates to the rest of the Eurozone, they are roughly 1.45 percentage points above the EU average rate of 1.28%. According to the Banking & Payments Federation Ireland (BPFI), the average first-time buyer mortgage is roughly €250,000. Meaning, that prospective Irish homeowners trying to purchase their first home would be paying about €180 more per month, or roughly €2200 more per year, compared to prospective homeowners in neighbouring EU countries. 


So why do Irish homeowners pay so much more? 


There is a multitude of factors that go into this so, let's dive in. First, there is a lack of competition in the Irish mortgage lending market. Only a few large banks such as Bank of Ireland and AIB lend the majority of the money, and with a relative lack of competitors, interest rates will tend to be higher as a result. While true, this small set of lenders also faces increased risks in the Irish mortgage market. Lending in Ireland is a generally riskier proposition, with a higher default rate compared to other EU countries. As of 2019, 5.9% of Irish mortgages had overdue payments or were in arrears. Only Greece (10.5%) and Turkey (10.8%) had higher rates of overdue payments. Compounding this is a lengthy and difficult home repossession process filled with political and legal roadblocks. In Ireland, there are many circumstances of a mortgage being in arrears for many years, but the bank won’t or can’t repossess it due to the complexity of the legal and political climate. According to the BPFI, it takes an average of 3.7 years for an Irish bank to repossess a home. In other EU countries with lower mortgage rates, this process takes a year or less. 

Further, Irish banks have to hold higher reserves compared to other countries in the EU. Irish banks learned this lesson the hard way during the 2008 financial crisis due to low stock of capital. Many Irish banks continue to have outstanding non-performing loans due to this crisis. Bank regulators now require higher reserve requirements, ensuring lenders have enough capital to cover their risky loan portfolios, with Irish banks needing to hold roughly three times the capital compared to the EU average. 

The lack of mortgage tech innovation also contributes to these high-interest rates. With higher mortgage tech adoption among Irish lenders, the mortgage process would be streamlined significantly, driving more competition while driving interest rates down. Brokers and consumers would benefit from reduced costs, automated processing, and reduced time spent in the application and approval process. For example, American mortgage tech firms such as QuickenLoans (Rocket Mortgage), LoanDepot and SoFi help speed this lengthy process up by directly acting as a lender or acting as an intermediary firm. These firms allow applicants to fill out a digital 1003 form, cutting out much of the face-to-face meeting time associated with typical mortgage applications. This type of innovation drives up competition within the market, which, in turn, could lead to lower mortgage rates. Here in Ireland, one such mortgage tech company, OnlineApplication, helps reduce costs to mortgage brokers while speeding up the process for all parties involved. Through AI and machine learning, OnlineApplication’s loan origination system can automatically approve applications while packaging and sending to lenders, saving brokers substantial time and effort. Their intuitive digital mortgage application allows the prospective home buyer to upload the necessary documents and go through the mortgage process in minutes. By significantly reducing the time required throughout the mortgage process, OnlineApplication can help prospective homeowners find a low mortgage rate that suits their needs in this hyper-competitive Irish residential housing market while allowing brokers and banks to compete much more aggressively. 


  • Interested in learning more about how Online Application can help improve your mortgage business? Contact us for a free demo or consultation: 
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