Ulster Bank has become the latest lender to announce a range of rate cuts affecting its fixed rate mortgage offerings. That news came as figures were published by the Central Bank last week, which showed that Irish banks are continuing to offer customers among the highest variable rates in the euro zone. The average variable rate in Ireland stands at 3.37%, while across the euro zone the average is around 1.8%.

Frank Conway, of MoneyWhizz and the Irish Financial Review, said the interest rate issue was a complex problem to which we were looking for a simple answer. "Across all markets, there are price variations. But there are more complex reasons here. There was a lot of competition in the market up to 2008 with up to 17 lenders. That didn't provide any solutions. There are issues around the cost of doing business, issues around arrears and taking a property back. We still have around 50,000 people with arrears of over 90 days. It's not as simple as the cost of accessing funding."

One German lender looked at the feasibility of entering the Irish mortgage market in recent months but decided against it after examining the situation here. "An interesting point to emerge from the whole Sparkasse discussion was that they concluded that they couldn't come in with pricing reflective of the German market. The Irish market is different from a political and social risk perspective. They concluded that they may be looking at pricing between 2 and 3%," he said.

Frank Conway compared that to the rates being offered by not-for-profit lenders such as the credit unions (which offer some mortgages) and the state lender, the Home Choice loan, offering rates of around 3 - 3.5%, which is reflective of where the banks themselves are.

Another issue affecting the market here is the high proportion of low-rate tracker mortgages that remain on the banks' books. "We ended up with over 300,000 mortgages - about half of all mortgages issued at the time - on margins of 0.75 or 1%. That undermined the whole banking system. In terms of where we go, Sparkasse gave the best answer. We won't be getting German pricing in the Irish market because it has different risks associated with it if lending goes wrong," he concluded.

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