Falling prices offer little relief as mortgage costs soar
Published 10/12/2010 | 05:00
IRELAND is the only country in Europe where prices are still falling -- but only if you exclude mortgage repayments, which have surged by 24pc in the last year.
After a 0.1pc decrease in prices during November, inflation is now running at 0.6pc, according to new figures from the Central Statistics Office. However, this figure is influenced by the massive rise in the cost of repayments for those on standard variable rate mortgages.
The EU measure of inflation -- which excludes mortgages -- places Ireland as the only member state where the cost of living has fallen in the last year.
Eurostat figures, which were also released yesterday, put Irish inflation at -0.8pc in October, compared with average price rises of 2.3pc across the rest of Europe, and 3.2pc in the UK -- meaning the price gap between north and south is continuing to narrow.
But for households struggling to meet hefty mortgages, those EU figures will be little relief as their cost of living has actually soared.
The CSO figures show the impact of this year's interest rate hikes -- which chiefly hit the 235,000 customers on variable rate mortgages, who have seen a 24.5pc rise in interest repayments since November.
November was the fourth month in a row where the annual inflation rate has been positive, following an unprecedented 19 months of decline.
For those homeowners who bought at the height of the boom, that means a massive extra burden at a time of falling wages, increasing taxes and job losses -- though those on tracker rates have not seen rate hikes, as the European base rate remained unchanged.
Lower alcohol, car and hotel prices all contributed to a marginal dip in Irish prices last month, though there was a 1.9pc increase for clothes and shoes, while petrol and diesel prices also rose.
Food prices are down 0.8pc in the year and fell slightly last month thanks to lower prices for potatoes, pork, poultry, cheese, eggs, fish, bacon and tea. However, the deep Budget cuts announced this week mean that inflationary pressures will remain subdued next year despite increases in excise in petrol and diesel.