Source: Irish Independent (Original Article)
HARD-PRESSED homeowners are set to pay the price after the cost of living was pushed up by mortgage hikes.
The consumer price index — the measurement of the cost of living — rose by 0.4pc in February, only the second time in the last 17 months that prices have risen rather than fallen.
The 0.5pc hike in the standard variable mortgage rate by Permanent TSB in February was one of the main reasons for the rise.
Economists say it is inevitable that more banks will follow suit — and those rate increases will lead to a hike in prices of a range of goods and services.
Annual inflation remains negative at -3.2pc but this is the smallest drop in nearly a year and much less than the fall of 6.6pc recorded last summer, new figures from the Central Statistics Office (CSO) show.
But with AIB warning they will increase their variable interest rates in coming months, and Bank of Ireland and EBS also signalling rises, analysts now predict that the era of falling prices is over and the cost of living will rise again during 2010.
Pressure
Cuts to mortgage interest rates last year were a huge driver of deflation but with no more European Central Bank cuts to ease pressure on consumers, even small increases in interest rates by lenders, such as Permanent TSB’s 0.5pc increase, have a big influence on the cost of living, said Ulster Bank chief economist Simon Barry.
“These dramatic swings in the rates of change exert a very strong influence on the trajectory for overall inflation, which we anticipate will itself be back in positive territory by, perhaps, the end of the summer,” he said.
Householders on tracker or fixed rates would not be hit by increases, but the overall price trend would still be up, he said.
Bloxham Stockbrokers said that economists were predicting a return to inflation by October or even earlier.
“It could be sooner than that the way things are cheap domestic flights from Ballina to Hobart going, especially if the banks keep pushing …continue reading
