The pass-through of reductions in policy interest rates is evident at the euro area aggregate level. However, lending rates continue to be higher for many countries.
For example, in Ireland interest rates on mortgages have declined since 2014 but remain comparatively high.8 Interest rates for SMEs vary significantly across Europe and are driven by a number of factors including firm characteristics (such as size and turnover), as well as country-level differences.9 One challenge faced by Irish SMEs is the relatively higher cost of credit compared to those in other euro area countries.