Mortgage rates hold steady but are seventh highest in Eurozone

At 4.27pc, the average interest rate on a new mortgage in Ireland decreased slightly from the 4.30pc rate recorded in September.

This is up 1.7 percentage points compared with a year ago.

This meant Ireland had the joint seventh highest rates in the Eurozone alongside Austria, figures from the Central Bank show.

And there has been a move by consumers to shift savings from overnight and current accounts, that pay little interest, into longer-term fixed rates.

Interest rate on new household deposits where the money is locked away for a period rose 0.05 percentage points in October to 2.59pc.

Savers put €1.34bn into these accounts in the month, the highest in any month since January 2021.

However, the vast majority of Irish savers still have their money resting in easy-access, demand deposit accounts where rates are a fraction of this.

Collectively, Irish savers are missing out on up to €3.5bn in interest a year, calculations by Daragh Cassidy of price comparison site Bonkers.ie show.

He said this is one of the main reasons Irish banks are so profitable right now.

“So I’d encourage people to make it one of their New Year’s resolutions to check out the best savings account for their money,” he said.

Banks here are likely to come under pressure after digital bank Bunq this week launched a new instant-access savings account that will pay 10 times more than a similar account with AIB.

Bunq, which is the Dutch equivalent of Revolut, has launched a new account paying 2.46pc.

And rates of 4pc and above are available from other providers such as Raisin and Trade Republic, which both facilitate Irish people putting money into banks on the Continent.

There is around €150bn in household savings in this country. However, some €142bn of these savings are instant-access accounts paying an average interest rate of just 0.11pc.

The Central Bank said the overnight rate rose to 0.12pc in October.

Mr Cassidy said that although mortgage rates in Ireland are at their highest level in years, they are still well below where one might have expected them to be given how high the ECB has raised rates over the past 18 months.

The key ECB rate that mortgages are priced off has risen 10 times in the last year and a half.

Mr Cassidy said: “Thankfully it does look as if the ECB has ended its rate hike cycle, which will no doubt be a relief to tracker holders and prospective first-time buyers in particular.”

The question now turns to when the ECB will start to cut rates.

Markets seem convinced the ECB will have to start cutting rates as soon as March or April due to plummeting inflation and a flagging Eurozone economy.

However, the ECB is adamant that it is still too early to talk about rate cuts and that the battle against inflation has not yet been fully won.