600,000 homeowners hit with mortgage rate hike
MORE than 600,000 homeowners were last night hit with another mortgage interest rate hike -- but European Central Bank president Jean-Claude Trichet insisted it was for Ireland's own good.
It came after the ECB governing council, including Central Bank Governor Patrick Honohan, voted unanimously to increase interest rates by 0.25pc this month.
The hike -- which will affect those on variable and tracker mortgages -- follows a similar move in April. Taken together, the two rises will mean repayments going up by €30 for every €100,000 borrowed. A typical €300,000 mortgage will therefore increase by €90 a month.
Opposition politicians denounced the move as "foolish" given the already fragile state of Ireland's economy, but Mr Trichet last night defended the hike.
The ECB puts up interest rates to limit the supply of credit, so prices of goods and services across Europe don't rise unpredictably.
"If we would lose control of our inflation. . . Ireland would not be better off, it would be a big blow," Mr Trichet insisted.
He said that Ireland was one of the most "vulnerable" countries in Europe and would be hardest hit by soaring prices.
Asked if he had any "sympathy" for the hardship the hike would impose on mortgage holders, Mr Trichet said all countries would ultimately benefit from the higher rates.
Europe's most powerful banker defended charges that the Frankfurt superbank was damaging Ireland, pointing to the €120bn in cash the ECB had loaned to the six bailed out banks.
"We are refinancing the Irish banks for amounts that have no precedent in Europe and the world," he said. "We are formidably helping Ireland."
Asked whether the ECB's series of rises could undermine Ireland's ability to complete its bailout programme, Mr Trichet said it was "extremely important" the programme was implemented.
"I have a lot of testimony now that Ireland, which has lost a lot of competitiveness in the boom, is now regaining competitiveness," he said.
"The (fiscal) adjustment is being processed in a very, very professional way."
Experts last night warned that yesterday's rise may be swiftly followed by another. The eurozone's reported inflation for May was 2.7pc -- sharply higher than the ECB's target rate of "below but close to 2pc".