Retail Interest Rates - October 2015

View information release with charts and related data tables.

Key Developments

• In October 2015, the volume of renegotiated loans stood at €894m, increasing by almost €187m compared to the previous month (Chart 1). The volume of renegotiated household loans for house purchase has steadily risen since May 2015, when it stood at just under €400m. Renegotiated interest rates pertaining to house purchase loans have remained within the relatively narrow range of 3.1 to 3.5 per cent since December 2014. Nevertheless, in October 2015 the renegotiated interest rate for house purchase loans increased by 26 basis points, standing at 3.46 per cent.
• The rate on new floating rate loan agreements¹  for house purchase (which includes renegotiations), was 3.46 per cent at end-October 2015, representing an increase of 22 basis points over the month. The equivalent euro rate was 2.06 per cent (Chart 2). The increase in new business variable rates may reflect both higher levels of renegotiations in October and a general shift towards fixed rate mortgage products. The increasing share of fixed rate new mortgage contracts is also reflected in Chart 5.
• New business loan-to-deposit spreads² for households have increased sharply since 2012 (Chart 3). Spreads peaked in April 2015 at 373 basis points. More recently, spreads have eased somewhat, declining to 339 basis points in August 2015. Despite the recent downward trend, the loan to deposit spread increased by 9 basis points at end-October 2015, to stand at 349 basis points.
• Rates on outstanding term deposits continued to decline in October 2015 (Chart 4). Rates applicable to NFCs decreased by 2 basis points to 0.41 per cent, while the corresponding rates for households fell by 6 basis points to stand at 1.13 per cent. New business deposit rates also declined for households, with rates declining by 3 basis points to 0.24 per cent at end-October.
• During the last quarter of 2014, 61 per cent of all new business mortgages were variable interest rate products. However, the proportion of new business variable rate mortgages has declined significantly over the last number of quarters to end-September 2015 (Chart 5). The ratio of fixed versus variable rate mortgages has shifted to approximately 50-50 from Q2 onwards. This change reflects consumers’ preference for cheaper fixed rate products currently on offer.
• Mortgage interest rates have generally declined during the third quarter of 2015, with fixed rates on new business buy-to-let mortgages falling by the largest margin. New business fixed interest rates are currently below standard or LTV variable for all instrument categories (Table 1). Variable PDH rates declined by 17 basis points over the second quarter with corresponding BTL rates falling by 14 basis points during the same period.

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.

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

² The loan to deposit spread is the difference between new business term deposits and the weighted average rate on new business loans to Households for either house purchase or consumer purposes, with a floating or up to one year initial fixation rate.