News Charlie Weston

Saturday 30 August 2014

Tax hikes and charges will only eat up the Super Mario savings

Published 06/06/2014 | 02:30

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ECB chief Mario Draghi
ECB chief Mario Draghi

AT a time when the Government is grabbing all it can off households in the form of tax and levy rises and benefit cuts, it is a relief that at least one institution is attempting to boost our flagging finances.

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'Super Mario' Draghi attempted to live up to his name with the sixth reduction in eurozone rates since he took over as president of the European Central Bank three years ago.

He is also trying to force banks to loan out money to businesses.

But it was a move by Europe's top central bank to deliver another boost to 375,000 tracker mortgage holders here that will catch the eye.

Although it will amount to a modest saving, tracker folk have now seen reductions of around €5,000 cumulatively since Mr Draghi took up his position.

Many of those on trackers are now paying little or nothing in interest, but the problem is that these are mostly boom buyers who drew down very large mortgages. Many are among the 93,000 mortgage account holders who are in arrears for three months or more.

The wise advice is not to use the cut to overpay the tracker mortgage by maintaining payments at the same level.

Far better to build up an emergency fund, or use the money to pay next year's water charges and property tax. Taxes and charges have acted like a black hole, devouring the best intentions of 'Super Mario'.

The news is not so good for the 200,000 mortgage holders on variable rates. Lenders are not obliged to pass on ECB rate reductions – except to tracker holders.

With most banks now fighting to pass upcoming ECB stress tests, there is little reason to believe they can afford to change their ways.

Charlie Weston

Irish Independent

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