Editorial: Fears of increase in mortgage arrears is real, so State must intervene when required
According to Soren Kierkegaard, “Trouble is the common denominator of living. It is the great equaliser”. In the philosopher’s world, such might be the case, but when it comes to parity of pain, in economics the poor tend to get more than their fair share.
So news that the cost of home loans is to climb again following the European Central Bank’s seventh interest rate hike in less than a year will hit some a whole lot harder than others.
The announcement has prompted Taoiseach Leo Varadkar to reveal that mortgage interest relief is under consideration for the next budget.
The increase pushes the key ECB rate to 3.75pc per cent and will add hundreds of euro on to the annual cost of a tracker mortgage.
The Taoiseach said the ECB had acted “to bring inflation under control and to restore price stability”.
But the increases could not come at a worse time for wage earners as inflation remains cripplingly high and the cost-of-living crisis shows no meaningful sign of easing significantly.
Christine Lagarde, the ECB president, deepened the gloom by signalling that the decision to increase the benchmark deposit rate would not be the last such move this year.
Small wonder then that the calls for relief for hard-pressed homeowners have become more strident. From a Brussels perspective, eurozone inflation remains well above the ECB’s 2pc target after rising for the first time in six months to 7pc last month, up from 6.9pc in March.
A cycle of rate hikes has caused havoc with US banks, but this side of the Atlantic eurozone banks have proven more resilient to date.
By way of reassurance, Ms Lagarde said the decision to slow the pace of rate rises from half a point to a quarter-point reflected signs that credit conditions were tightening. The consensus is that such factors will eventually cool inflation, making fewer rate increases necessary.
However, what happens to those left on the rack in the interim?
Finance Minister Michael McGrath has said there is a “concern” that rising interest rates could lead to an increase in mortgage arrears in Ireland.
With around 23,000 mortgages already in long-term trouble, this smacks of understatement.
In predictably fractious exchanges, the Government was accused of “washing its hands and abandoning” mortgage holders.
Sinn Féin’s Pearse Doherty slated the Coalition for not introducing immediate temporary interest rate relief. Pressure for assistance is likely to grow. What matters is that it is targeted and tailored for those who need it most.
In the past, much of the economic hardship visited upon on our country came from saying yes too quickly and not saying no soon enough.
As Tánaiste Micheál Martin pointed out, the State has so far presided over interventions totalling €12bn. Any further assistance must be considered and equitable. We must first do what’s necessary, then perhaps we can look at what’s possible.