Dr. Mark Cassidy:

First of all, interest rates are abnormally low. At some stage they will begin to normalise. When they do, I firmly believe that the increases will be gradual and modest. When we see this normalisation it will be at a modest pace so I certainly do not see scenarios where we will get very rapid increases in interest rates. I will mention two effects. Households will undoubtedly see an increase in mortgage repayments. I quoted some figures whereby a 1% rise in interest rates would lead to an increase of around €130 per month for the average mortgage holders. Those most affected would be those on floating rates or tracker mortgages. That would be the most obvious impact that households would feel. From an economic perspective, higher interest rates also work to slow down business investment within the economy. Interest rates are usually increased because the economy is beginning to grow at a faster rate than the Central Bank is comfortable with and that is being reflected and shown up in higher interest rates. Higher interest rates slow the rate of economic growth overall because they slow household consumption, because households are paying more on mortgages and have pay more to borrow money. Firms have to pay more to invest. They are two main channels through which an economy is affected.