OREANDA-NEWS. The Central Bank has published an Economic Letter entitled Mortgage Interest Rate Types in Ireland. 

The letter profiles interest rate types across the Irish mortgage market with a focus on:

  1. Originating interest rate types;
  2. Borrower characteristics per interest rate type;
  3. Financial burden per interest rate type;

The key findings are as follows:

  • Loans originating on variable contracts exhibit a low propensity to change rate type over time. In contrast, 81 per cent of fixed rate mortgage contracts at origination moved to a variable rate contract after the fixed rate period ends.
  • Through the period 2002-2008,while credit conditions across all interest rate types loosened, within the variable rate category, Tracker mortgages were allocated with the least restrictive credit conditions (higher LTV and balances) to a borrower pool which had a greater share of self-employed borrowers, a group with traditionally higher income volatility.
  • Borrowers pay different instalments depending on which mortgage contract type they hold. At December 2013, we find the median instalment is €756 per month for Tracker holders, €775 for SVR holders and €834 on loans with fixed rates.
  • The differential in monthly instalments varies depending on factors such as year of loan origination, with large differentials between SVR and tracker instalments occurring for loans originated in 2007 and 2008 (Figure 5a). Further, for homeowners with a December 2013 valuation over €330,000, the instalments do not differ between SVR and Trackers (Figure 6).