ILL WIND OF LOW GROWTH BLOWS GOOD FOR MORTGAGES

IT’S an ill wind that blows no one any good. The EU has cut growth forecasts for the eurozone with the threat of a no-deal, crashout Brexit looming. As a result, mortgage holders will get a reprieve as interest rates won’t be hiked this year and probably won’t be increased through next year either. Deutsche Bank is now forecasting there will be no European Central Bank (ECB) rate hike until December 2020.

The ECB now won’t be able to normalise interest rates, which are trapped at all-time lows, without risking an even greater slow down.

A decade on from the crash, households in this country are the fourth most heavily indebted in Europe. Data released by the Central Bank showed household debt was €137.5bn here last year.

The ECB’s low interest rates of the Celtic Tiger era did result in cheap money being available for borrowing. In the absence of adequate regulations, too much lending extended the banking sector beyond safe levels and the collapse happened when the pinch came.

Now householders are pleased to see their mortgage repayments won’t be increasing for possibly another 22 months. Swings and roundabouts.

Mortgage lending rules are also keeping a lid on the market and borrowing.

As Sherry Fitzgerald’s ‘Irish Residential Market Review 2018, Outlook 2019’ noted yesterday: “Due to stricter mortgage conditions, and to a lesser extent an increase in the supply of new homes, 2018 saw a reduction in the rate of price growth.”

British Prime Minister Theresa May went to Brussels yesterday seeking to reopen the Withdrawal Agreement. She was immediately rebuffed by EU officials, meaning a no-deal Brexit on March 30 is more likely than ever.

Mrs May arrives in Dublin this evening endeavouring to salvage some sort of respectable outcome from her calamitous and amateurish

Brexit negotiating strategy.

The die now seems to be cast, unfortunately. What Brexit will bring remains to be seen but this uncertainty is causing jitters on the economic front, not just in Ireland, but right across the EU.

Growth forecasts being cut by a third is not a positive development for this country.

Germany’s 10-year bond yield sank to its lowest level in over two years, taking a step closer to zero per cent, after the sharp cuts to the growth and inflation forecasts fuelled concern about the economic outlook.

Yields on top-rated bonds across the EU tumbled, while Italy’s borrowing costs surged on fears that weak growth will exacerbate its fiscal problems.

The European Commission says it expects eurozone growth to slow to 1.3pc this year versus an earlier estimate of 1.9pc. Inflation is expected to be 1.4pc, well short of the ECB’s target of 2pc.

A string of weak data has reinforced the view the ECB won’t lift interest rates and will instead consider ways to stimulate the economy, such as a new set of cheap loans to banks.

When the music eventually stops, we’d better hang on to our chairs.

The die now seems to be cast for a no-deal Brexit, unfortunately