Central Bank publishes data on the distribution of retail interest rates focusing on non-bank mortgage lending

08 June 2023 Press Release

Central Bank of Ireland

As part of its ‘Behind the Data’ series, the Central Bank of Ireland has today (8 June) published further analysis of the distribution of interest rates across borrowers in the mortgage market.

Today’s publication follows the Statistical Release in May which outlined weighted averages of retail interest rates charged by banks and non-banks.

Drawing on loan data from the Central Credit Register, the paper provides deeper analysis of the distribution of interest rates for borrowers depending on the category of their mortgage lender.

The publication shows, as at March 2023:

  • Banks accounted for approximately 80 per cent of the total outstanding value of home loans. Non-banks that lend account for 8 per cent, while the share of non-banks that do not lend had grown to 13 per cent.
  • While the range of interest rates charged by banks and lending non-banks has tightened, it has widened for non-banks that do not lend since late 2022.
  • Non-banks that do not lend had a higher concentration of home loans at both the lower and upper end of the interest rate spectrum.
  • 90 per cent of bank-held home loans had an interest rate of below or equal to 4.4 per cent.  For lending non-banks, 90 per cent of loans are paying less than or equal to 3.5 per cent interest rates. And 90 per cent of loans held by non-banks that do not lend have an interest rate of 6.5 per cent or less.
  • While 20 per cent of non-lending non-bank home loans had an interest rate of 6 per cent or higher, less than 1 per cent of loans had a rate of 8 per cent or higher.

Deputy Governor Vasileios Madouros emphasised the importance of this analysis in understanding how the necessary policy actions taken by the ECB to tackle inflation are transmitting through different cohorts of borrowers. He said: “The variation we see in interest rates increases across the system is due to a number of factors, including differences in the underlying funding models of the different cohorts of mortgage providers in the market and the nature of the mortgage contracts. The interest rate you are charged will first and foremost depend on your mortgage product. Some people are on fixed rate mortgages, some are on variable rate mortgages and others are on tracker mortgages.”

Pointing to the Central Bank’s Financial Stability Review published yesterday, Deputy Governor Madouros said: “Despite the real challenges from high levels of inflation, Irish households have proven broadly resilient so far.  Our assessment is that, if the economy continues to evolve in line with our expectations, we are likely to see only modest increases in household financial distress. But this aggregate picture masks very real challenges for some cohorts of households. This emphasises the importance of moving beyond aggregate metrics, to understand better the distribution of interest rate increases across mortgagors.”

Deputy Governor Madouros added that Ireland has a very strong consumer protection framework, and over a decade of experience in dealing with arrears. “The Central Bank will continue to work to ensure that firms meet their responsibilities to support consumers facing difficulties in managing their mortgage repayments or with switching their provider. If you feel you are in need of support, I would encourage you to contact your mortgage provider and discuss the options that are available to you. Early engagement is key if you think you are getting into difficulty.”

Notes to Editors

Behind the Data – full series