ECB Hikes

The markets expect Trichet to announce a 0.25% increase in the ECB interest rate tomorow, Thursday 7th July 2011, and perhaps another similarly small increase in October. Irish mortgage rates will increase directly, for those on trackers. The next few months are likely to be very interesting. Why?

The primary reason for the ECB rate increases is to curb inflation. The fact that this policy is not helping the situation in the peripheral PIGS economies is very much a secondary consideration, at least for now. Greece has had its second bailout, Portugal is due one, Ireland will need another one despite Enda’s assurances that we always pay our debts, but let’s see how Spain and Italy fare by late 2011.

Anyway, it looks like the Chinese have come to our rescue.  The minimum wage has just increased there by 50%, inflation is now a major concern, property transactions are down 49% and their numbers of empty housing units are of epic proportions. China was perhaps the only major economy expected to grow this year, but that appears to have changed now. Some people are now suggesting a global double-dip recession. The demand for oil should fall, European inflation will fall and ECB interest rate hikes will presumably come to an abrupt halt.   Ireland’s personal debt situation then looks like dragging on as “death by a thousand cuts”. The banks are not doing much lending, so they won’t make much money, there seems to be no bank plan for the increasing number of people struggling with mortgage arrears and negative equity, so where do we go from here?

We’re here to help.

The Loan Arranger

www.GoodFinancialHousekeeping.ie

www.LucasMortgage.ie

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