Mortgage rates in Ireland have increased dramatically over the past 12 months, putting significant pressure on landlords seeking financing for investment properties.

The average new mortgage rate stood at just 2.58% in September 2022. But by September 2023, this had spiked to 4.3% – a massive 1.72 percentage point increase in a single year.

For landlords taking out typical mortgages of €300,000 to finance a rental property investment, this translates to about €280 extra in monthly repayments or an additional €3,300 yearly.

What’s Causing the Rate Hikes?

The rate rises primarily reflect a series of benchmark interest rate increases by the European Central Bank (ECB) aimed at reining in record-high inflation across the eurozone.

The ECB has implemented ten consecutive 0.5% rate hikes over the last year, taking its key lending rate from 0% to 2.5%. This has flowed through to commercial banks in Ireland.

Irish banks have not passed on the full extent of ECB rate rises to customers so far. But non-bank lenders, who account for a growing share of the Irish mortgage market, have taken a much more aggressive stance.

Some non-banks are now charging variable mortgage rates of over 7% – more than double the typical rate just two years ago.

What’s Being Done to Ease the Impact?

The Irish government has introduced various schemes, such as Help-to-Buy and First Home, to support first-time homebuyers coping with rising rates.

But specific measures to alleviate cost pressures for landlords and property investors have been decidedly lacking.

Industry groups like the Irish Property Owners’ Association have called for urgent government action, including:

• Tax incentives and write-offs to offset higher financing costs
• Reductions in stamp duty, capital gains tax, and local property tax
• Subsidized mortgage lending rates for investment properties
• Expansion of rental income tax abatement

However, the prospect of material policy steps looks remote given the weak fiscal situation.

Is Now a Good Time to Become a Landlord?

Despite steeply rising mortgage rates, rental demand remains extremely strong across Ireland, driven by population growth and inadequate supply.

Rental prices are increasing at double-digit rates annually in many areas. With property price inflation also persisting, investment in rental property can still make financial sense.

Leveraging professional property management will become even more crucial to maximize returns as financing costs rise.

Utilizing property managers provides vital expertise in areas like tenant screening, rent collection, and regulatory compliance – allowing landlords to focus on high-level decision-making.

Quality Property Management in Dublin

For over 25 years, KPM Group has provided specialist property management for landlords across Dublin and Ireland.

Our hands-on approach covers everything from advertising vacancies and conducting viewings, to comprehensively vetting tenant applicants, rent collection, maintenance coordination, and ensuring full legal/regulatory compliance.

Whether you’re an experienced landlord or just starting, KPM Group has the expertise to optimise your investment property and generate maximum returns even in today’s rising rate environment.

Contact us today to learn more about our end-to-end property management services. Our dedicated team is ready to provide the support you need to successfully navigate Ireland’s evolving rental market as a landlord.