Retail Interest Rates - March 2016

View information release with charts and related data tables.

Key Developments

A selection of fixed and floating Buy-To-Let (BTL) mortgage rates for are shown in Chart 1. All BTL mortgage rates have declined over the year ending Q1 2016. The sharpest fall was observed for BTL rates fixed for over 3 years, which declined by 65 basis points to 5.36 per cent over the year ending Q1 2016. Variable mortgage rates for BTLs also declined, falling by 26 basis points to 4.9 per cent over the year to end-Q1 2016.

In terms of Principal Dwelling House (PDH) mortgage rates, the sharpest decline was observed for standard variable or LTV variable rate mortgages, which fell by 49 basis points to 3.64 per cent over the year ending Q1-2016 (Chart 2). Fixed rate PDH mortgage rates also declined, with rates fixed for 1-3 years falling by 34 basis points over the same period. PDH mortgage rates across all instrument categories have declined over the 12 month period ending in the first quarter of 2016.

During the fourth quarter of 2014, 61 per cent of new business mortgages were variable interest rate products. The ratio of fixed versus variable rate mortgages shifted to an approximate 50-50 split from Q2 to Q4 2015 (Chart 3). However, during Q1 2016 52 per cent of new business drawn down mortgages were at variable rates. In general, the changing composition of new mortgages reflects the preference for cheaper fixed rate products currently on offer from domestic banks.

In March 2016, the volume of renegotiated loans for house purchase stood at circa €432m, a decrease of €462m since October 2015, when renegotiations peaked at almost €894m (Chart 4). In general, the majority of renegotiated contracts reflect normal market behaviours such as switching between various mortgage products offered by retail banks. Renegotiated interest rates for house purchase loans decreased by 39 basis points to 3.1 per cent during March 2016.

The rate on new floating rate loan agreements^[1]  for house purchase (which includes renegotiations) was 3.16 per cent at end-March 2016, representing a decrease of 7 basis points over the month. The equivalent euro rate was 1.89 per cent (Chart 5).
In general, interest rates on household term deposits have continued to decline in March 2016 (Chart 6). Rates on new business household deposits decreased by 3 basis points to 0.18 per cent at end-March 2016. The corresponding euro area interest rate fell by 1 basis point to 0.62 per cent over the same period. New business NFC term deposits remained unchanged over the month at just 0.07 per cent. However, NFC term deposits in the euro area fell by 8 basis points to stand at 0.18 per cent at end-March 2016.

Note

A number of enhancements to the calculation of the national weighted average interest rates and national total business volumes have been introduced in ECB Guideline (ECB/2014/15) on monetary and financial statistics. These enhancements introduced in the Guideline involve changes to the sampling methods. The changes made contribute to a further harmonization of the data compilation process thus improving cross-country data comparison. The changes apply as of January 2015 for reference period December 2014. As a result of these enhancements, data have been recalculated, as per the requirements of Guideline ECB/2014/15, for previous reference periods in order to ensure a consistent and coherent compilation of data across time and to allow for time series analysis. The extensive set of Retail Interest Rate Statistics tables are available on the Central Bank of Ireland website.

Retail Interest Rate Statistics cover all euro-denominated lending to, and deposits from, households and non-financial corporations (NFCs) in the euro area by credit institutions resident in Ireland. Interest rates on outstanding amounts cover all loans and deposits outstanding on the last working day of the month, while interest rates applicable to new business volumes cover all new loan and deposit business agreed during the month.

For retail interest rate statistics purposes, new business is defined as any new agreement between the customer and the credit institution. This agreement covers all financial contracts that specify, for the first time, the interest rate of the deposit or loan, including any renegotiation of existing deposits and loans. Automatic renewals of existing contracts, which occur without any involvement by the customer, are not included in new business. New business volumes have been exceptionally low in various instrument categories during the last number of months. Low volumes of this nature can result in increased volatility within the interest rate series.

New loan agreements to households for house purchase with either a floating or initial rate fixation period of up to one year are broader in scope than just ‘new mortgages’, issued at variable interest rates. There are a number of factors that can lead to differences between MIR statistics and interest rates advertised by resident credit institutions, including renegotiated loans, the inclusion of home improvement loans, and the underlying MIR compilation methodology. New data on mortgage interest rates are available, and outlined above, these rates are not part of the MIR framework and represent drawdowns broken down by type of interest rate (i.e. Fixed, Tracker and SVR). These data will be available on a quarterly basis.

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^[1] Floating rates include variable rates and loans with an initial fixation up to one year.