Inflation falls to lowest level for three years
Mortgages down 8.4pc but potato prices soar
HOUSEHOLDERS have benefited from big falls in mortgage repayments in the last year – pushing inflation to its lowest level in nearly three years.
New figures from the Central Statistics Office show that the cost of living fell marginally in May and is up just 0.4pc in the last year.
This means that prices are increasing slower than at any time since September 2010.
The Consumer Price Index shows that mortgage interest repayments fell by 2pc in the month and are 8.4pc lower than a year ago.
And that is likely to fall further for many homeowners this month as the latest European Central Bank interest rate cut feeds through into lower repayments in June.
However, it is tracker mortgage customers who are benefiting due to the fall in ECB rates, as many of those on variable rates have been hit with higher repayments in the last year.
In the meantime private rents continued to rise, going up 0.4pc in May and by 5.6pc in the last year, the CSO figures show.
Drivers benefited from a drop in fuel prices last month of 3.3pc for diesel and 2.5pc for petrol, with the cost of filling up now over 5pc lower than it was a year ago.
The most significant cost increases in the last year have been a 4.8pc rise in education costs because of higher third level charges and a 4.9pc hike in alcohol prices due to government excise hikes.
Food prices are up 1.5pc in the last year, with increases for cheese, processed fish, potatoes and crisps last month.
The price of potatoes is now a massive 36.3pc higher than it was this time last year.
Clothes and footwear prices fell by 0.6pc in May and were 2.7pc lower than a year ago – a fall that may have been caused by bad weather discouraging shoppers from making new summer purchases.
Health insurance premiums have soared by 12.5pc in the last year, but car insurance is down 7.6pc.
Domestic inflationary pressures are likely to remain low for some time even though the 10c per litre increase in the price of milk last week will add a further cost to the weekly shop, said Alan McQuaid of Merrion stockbrokers.
"The main risk on the inflation front this year will once more come from the external side, and in particular the price of energy and food on the global market," he said.
The full impact of the ECB interest rate cut is likely to be seen in the inflation figures for June, said Conall Mac Coille, chief economist with Davy stockbrokers.
The fall in inflation was good news for consumer spending as households would benefit from lower energy and mortgage costs, he said.