This morning’s Indo leads with an angle on the inflation figures yesterday to suggest that interest rates may be cut on the back of the reduced inflation rate from 5 to 4.4%. The article is credited to Brendan Keenan.
Outside of the fact that yesterday’s figures are just one month when there were deep sales with interest rate, electricity and gas increases to be added in the Index August/September. However, the Indo link this ‘surprise drop’ in Irish inflation with the ECB cutting interest rates. Specifically two cuts in the first half of 09. However, Eurozone inflation actually increased to 4.1% last month - no ‘surprise drop’ in inflation there. Or does the Indo really believe that the ECB basis their interest rate decisions on inflation in Ireland?
This is just yet another nonsense headline from the Indo, a few months ago they had that headline story that rates would fall 0.75% by the end of the year only for the ECB to increase rates as many pinsters would have told them was more likely to happen!
The level of analysis in the Indo group is so bad it is beyond a joke. The Indo group only seem interested as acting as the poster boy for property Vi’s of which it has an interest with the property/recruitment advertsing revenue it generates. What a rag of a newspaper group.
Lets say the central bank do reduce the base rate. Does anyone actually believe that the Irish banks, in this current climate, will pass these rate cuts on to mortgage holders? IMO only tracker rates will go down if the ECB rate goes down.
Or even if rates did come down would it make the slightest difference to the property market? US rates have more than halved and all that the Fed did is debase the dollar just that little bit more. Ask the Japanese if 0.25% would make much of a difference in a post-property bubble economy.
Even if they cut 50bps in the next 12mos, it will do nothing to stop the rot, although it might make it slower
Its the “supply of credit” that is much more important. Just because the ECB cuts does not mean banks are going to let people have another roll of the dice. Even if they did, am not convinced there are too many people out there chomping at the bit to inherit someone elses headache until things are appropriately priced for the risks people previously felt were non-existant.
There are harsh lessons in the perils of leverage being learnt here. Historically they are ingrained in peoples minds for a good 10-15 years. At some point, a new generation of monkeys will come along and create another mess, sadly that generation is still in nappies
No, but this article is not about the property market or house prices, nor is it suggested that a drop in rates would mean that house prices would go up or stablise. But what they are suggesting is that there will be relief to people who already have mortgages in that they are predicting that their mortgage bills will be on average €50 less per month per drop.
No it’s not, or at least it’s not unless the only thing you can think about are house prices. If mortgage interest rates went down this would slightly ease the pressure on a lot of people’s monthly budgets.
However, talking about ECB interest rate cuts and expecting them to be passed on to the consumer is kinda like seeing a FF government with a budget surplus and expecting this to be passed on as some kind of increase in public spending on health, education, infrastructure etc.