What Sort Of Impact Have Rate Hikes Had On The Irish Economy?
There is little doubt that the larger and longer sequence of interest rate hikes has begun to influence Irish borrowers in common with their counterparts across the Eurozone. As Diagram 4 indicates, the extent of the slowdown in borrowing for house purchase is broadly proportionate here and elsewhere although the pace of borrowing in Ireland remains a good deal stronger than the Eurozone average. For someone taking out an average mortgage of around 250K in late 2005, average monthly repayments will have been boosted by 8 ECB rate increases which cumulatively amount to about 280 extra per month in loan repayments. Over the same time period, a two income family earning 80K per annum will have benefited from income tax cuts and an increase in mortgage tax relief that would have raised monthly post-tax income by about 380 per month. So, higher borrowing costs have eroded the large part of any gains in spending power in the past two years. Not surprisingly, this hit to spending power has ca
