Article: Mortgage rates tipped to rise this year as Ulster Bank and KBC exit

Irish mortgage rates will rebound back towards their status as the euro area’s dearest this year as the effect of pressure from savers mounts on banks, ratings agency DBRS has warned.

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Irish banks’ major source of funding is deposits, which represents 80.38pc of their total funding ratio, compared with a European average of 69.65pc.

Irish banks’ loan-to-deposit ratio was 70.9pc at the end of the third quarter of 2022 versus a European average of 104.8pc – meaning lenders have fully funded their loan portfolio with deposits that are still mostly priced at 0pc and which have provided a cushion for both banks and borrowers.

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Irish banks may no longer be slow in raising mortgage rates in tandem with the European Central Bank, when rivals Ulster Bank and KBC Bank have finally closed their doors, ratings firm DBRS Morningstar has said.

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"Irish banks had a starting point for mortgage interest rates of 2.72% in December 2021, a much higher rate than most European peers, where rates ranged from 0.79% in Finland to 1.65% in Netherlands, with an average interest rate for the euro area of 1.31%," according to DBRS.

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