Covid restrictions saw mortgage lending decrease to lowest level on record in May

The volume of new mortgages agreed with banks in May amounted to €377 million, which represented a drop of 48%, according to figures released by the Central Bank today.

The regulator said the decrease was the largest year-on-year decline since the series began, and was the result of restrictions imposed during the Covid-19 pandemic.

Of this, €296 million was agreed in new fixed rate mortgages, a decrease of 44% on May the previous year. New variable rate mortgage agreements declined by 60% to €81 million in May.

The Central Bank figures show that fixed rate mortgages (including renegotiations) accounted for almost three-quarters of all new agreements in the three months to May. This compares with 82% of new agreements for the same period in the euro area.

In terms of consumer lending, it contracted by more than half for a second month in a row, and stood at €82 million in May.

This represents a decline of €114 million or 58 per cent on the same month the previous year. The average interest rate was 7.27%, which is in contrast to the equivalent euro area rate of 5.12% in May.

The volume of new business lending to SMEs stood at €118 million in May, €46 million or 28% lower than in the May 2019.

Interest rates on new household term deposits stood at 0.02% in May. Equivalent euro area rates were 0.27%.  Interest rates on new business NFC term deposits in Ireland declined in May, to -0.16%. Corresponding NFC term deposit rates for the euro area stood at -0.10%.

Reacting to the figures, Brokers Ireland said not only are Irish mortgage holders paying much higher interest rates than their euro area counterparts but Irish SMEs are being "absolutely fleeced" by comparison with their euro area businesses.

It said the differential means Irish SMEs are paying 3.51% more than their euro are counterparts.

"We have never more needed our SME sector than we do now," said Rachel McGovern, Director of Financial Services at Brokers Ireland.

"On the basis of today’s figures an Irish SME borrowing €100,000 over a five year term would have to repay almost €9,500 more on average than its Euro area counterpart over that five years for the same loan," she said.