Jim Higgins (Fine Gael)

The decision by the European Central Bank to cut interest rates by 0.5% was a welcome relief for those with high mortgages. A four-bedroom house in any large town now averages a purchase price of €200,000. Despite the fact that European interest rates are at an historic low, this still represents monthly repayments of approximately €1,600 or €1,700 to a young couple on two average incomes. The sum of €400 per week is a huge burden just to, literally, keep the roof over one's head. When one then factors into the equation that we have jumped to the top of the European league in terms of prices and living costs, young people are put to the pin of their collars in order to keep body and soul together.

While the announcement ten days ago that housing prices are about to peak is good news for those who intend to invest in a house in the future, it is less positive for home owners and, in particular, from the point of view of those who have already made that investment, with mortgages of €200,000. It is potentially frightening news because it heralds a drop in house prices which would, in effect, mean a negative equity situation for some home owners.

We welcome the decision by the European Central Bank. When its Governor, Wim Duisenberg, announced that the ECB was reducing its interest rate by a half of 1%, many young couples breathed a sigh of relief in the expectation that the saving on their €200,000 mortgage would be €83 per month – not a princely sum, but nevertheless welcome. However, it was not to be. Not a squeak was heard for hours after the announcement from a single financial or lending institution as to whether or to what extent, if any, they would reduce their interest rates in the wake of the ECB cut. There was no indication as to what relief would be given to domestic borrowers.