We must heed lesson on variable rate borrowing
THE Fianna Fail-led governments of 1997-2010 will live in infamy for their failure to deal with the consequences of joining the single currency. But one of their worst pieces of neglect has largely gone unremarked on -- the failure to do anything about the danger posed by variable interest rates.
That danger has now become a reality for thousands, as the banks increase rates to reduce spiralling losses. Even the lucky holders of "tracker" mortgages, where the interest rate varies only with changes in the basic rate charged by the ECB, have already been hit and more hikes will inevitably follow.
The weight of changing mortgage rates on the economy was a problem before the euro but the single currency greatly exacerbated it. Cheaper money turned a growing economy into a bubble; now dearer money is a stranglehold on any recovery.