Poorer families hit hardest by price hikes during austerity years - report
LOW-income households were hit hardest by price rises during the austerity years, new research has found.
Spiralling rents have had a disproportionate impact on poorer households, a report by the Economic and Social Research Institute (ESRI) has concluded.
Other groups benefited from mortgage costs coming down, after the European Central Bank cut interest rates in a bid to stimulate the Eurozone economies.
Those with tracker mortgages have seen monthly repayments fall dramatically. Even variable rates have come down from the highs they were at during the earlier period of the downturn. However, variable rates remain way above tracker rates.
But this did not help retired people who generally do not have mortgage. The ESRI said retired households experienced higher average inflation in the 2009 to 2014 period.
Low and high income households purchase different baskets of goods and services.
There were big rises in fuel and electricity prices and alcohol and tobacco in the 2003 to 2014 period.
Households with children experienced lower inflation than the average for the state during the austerity years. This is because they have higher levels of homeownership and benefited from lower mortgage rates.
As a result, the rates of inflation for low and high income households can differ from inflation as measured by the Consumer Price Index, which is based on a basket of goods averaged over all households, the report found.
The study, called ‘The Distributional Impact of Inflation: 2003 – 2014’, found that low income groups are more likely to rent their homes, while high income groups were more likely to have a mortgage.
Rents have shot up in financial crash, and are now back to close to the levels they were at before the downturn.
Differences in the inflation rate for renters and for those with mortgages help to explain the differences in overall inflation experience for both high and low income groups, the ESRI said.
The authors of the report, Brian Colgan and Tim Callan, said it is important to work out how price rises impact different segments of society.
Mr Colgan said: “While the inflation differentials across income groups have been modest compared with those in the UK, regular monitoring of differences in inflation rates across different income groups should be considered.”