Rate cuts will leave people €700 a year better off, says report

Rate cuts will leave people €700 a year better off, says report

IBEC chief economist Fergal O'Brien

Homeowners will be €700 better off each year thanks to reductions in mortgage interest rates, a new report has revealed.

Reduced mortgage interest rates are expected to result in a 2.4% rise in the amount of discretionary income householders have by the end of 2012.

However, the consumer index study from the Irish Business and Employers Confederation (IBEC) showed that while mortgage holders may see their spending power increase, other groups could end up worse off.

IBEC chief economist Fergal O’Brien said the Government needs to consider consumers and their different circumstances in its efforts to revive the economy.

“A significant number will see their spending power increase this year, due to falling interest rates, modest pay rises and the absence of significant additional taxation,” Mr O’Brien said.

“The Government’s approach to reviving activity in the domestic economy needs to be tailored to reflect the different types of consumer and their different circumstances.”

The European Central Bank is expected to reduce its rate by a further 0.5% in the coming months, which will have a positive effect on householders. The Irish Consumer Monitor report from IBEC, an organisation that represents Irish business, found non-mortgage holders could see their discretionary income drop between 0.8% and 3.7%.

“For 2012, we have pencilled in an average decline of about 1% in discretionary income,” the report added.

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