The Mortgage Market – What to Expect in 2025
2024 saw lots of change in the mortgage market with reduced rates, new lenders and huge demand seeing mortgage approval figures at a record high.
What can we expect in 2025?
Interest rates –
After two years of upward movement on rates, 2024 brought welcome rate cuts.
The ECB reduced rates by 1.35pc and based on incoming data this rate cut cycle is likely to continue into 2025.
While tracker mortgages are directly linked to the ECB refinancing rate, those without a tracker rate or new mortgage customers may not see the benefit of further ECB rate cuts.
Banks fund new mortgage lending in two ways either on money markets or via markets and deposits which they hold from savers.
The Euribor is the rate at which banks can obtain funds to lend so it is the Euribor rate that impacts the vast majority of mortgage holders interest rates.
As funding costs have decreased for the banks we have seen most lenders cut rates, some by up to 1pc even in the second half of 2024.
There is however a huge disparity on rates across the market with the lowest rates starting from 3pc but highest ranging to 6.4pc.
Fixed rates remain lower than variable rates with a difference of 0.75pc between the lowest variable rate at 3.95pc and the lowest non Green fixed rate, a 4 year fixed rate of 3.2pc.
Rates at the top end should decrease as funding costs become more favourable in particular for non-bank lenders.
At the lower end of the market you may see lenders tweak individual rates to remain competitive however it is unlikely that we will see a mass drop in rates. Recent rate cuts have already taken into account any expected reduction in future funding costs.
Who can secure the best mortgage rates
The most favourable rates in the market currently are Green rates but those with lower loan to values will also see big savings by reviewing their rate.
Lenders tier their rates by loan to value, which is your mortgage balance relative to the value of your home.
Given consistent annual property price inflation currently standing at 9.7pc, loan to values have become lower and mortgage holders can use the equity in their home to unlock lower rates.
A homeowner who purchased just 12 months ago with a 10pc deposit could therefore be in a position that they hit the 80pc threshold.
There can be a difference of up to 0.55pc on rates that are below 80pc loan to value.
The highest rate on the market is now more than double the lowest making it essential to do your research or seek market based advice when reviewing rates or taking out your first mortgage.
Competition creates market discipline
There are now 12 mortgage lenders in the Irish market offering increased choice to consumers.
MoCo and Nua Money entered the Irish mortgage market having identified the opportunity to disrupt the pillar banks who continue to dominate mortgage market share.
Newer lenders to the Irish market have come in strong with digital mortgage solutions and innovative product offerings.
The anticipated launch of Revolut’s mortgage product in 2025 could be a real boost to the Irish mortgage market. If they can combine a competitive rate with a slick tech offering, in what is such a complex product category, they could really challenge the incumbents.
The Irish market does not need tens of lenders, the market does not have enough activity to warrant that, but what we do need is a competitive environment to keep rates low.
The mortgage holder has a role to play in creating market discipline, as a Nation we are extremely poor at switching mortgage, even when there is a clear benefit.
Unless we become active mortgage switchers who seek out lower rates there will be no necessity for larger players in the market to reduce rates.
Getting the mortgage is the easy piece
Latest (BPFI) figures show that average first time buyer and home mover mortgage values have reached their highest levels in over 20 years.
Yet, with soaring property prices and a demand outstripping supply mortgage approval can seem like the least of a would-be homeowners worries.
In 2023 there were 32,548 new homes completed, at end Q3 2024 the year to date figure stood at 21,634.
Regardless of whether the figure for 2023 is met or exceeded the reality is there is just not enough homes being built and even less become available to families to purchase.
Approximately 27pc of new homes built in 2023 were sold on the market so less than 9,000 new homes.
35,635 mortgages were drawn down in 2023 by home purchasers and so the figures highlight that second hand home purchases far exceed the purchase of new homes.
For those purchasing second hand homes the challenge is that homes in walk in condition tend to attract a premium so a lot of affordable homes that come to market require work.
Many house hunters do not realise that they can look to finance works to a home. Provided you are eligible for the mortgage level and the works add value financing home renovations at time of purchase is possible.
In a market constrained by supply all options need to be considered and renovating a home may turn your first home into your forever home.
Hoping to buy in 2025? Need advice, just ask our team, its what we do – Start Here!
