President of the European Central Bank Christine Lagarde addresses a press conference following the meeting of the governing council of the ECB in Frankfurt earlier this month The European Central Bank’s pivot on interest rates is almost complete. It has not always been a convincing journey, due in large part to differences of opinion on the ECB governing council. However, with inflationary pressures easing fast, the first move downwards in borrowing costs is now not far off.
The downward trend in interest rates has implications for Ireland. On balance it will be good for economic growth over the next year or two, but in the short term the impact will be limited . This is because tens of thousands of borrowers moving off fixed interest rates taken out when ECB rates were at rock bottom levels will face much higher repayments. The interest rates on offer to these borrowers should edge lower, but will remain much higher than the cost of their existing loans.
The Guinness heir on the future of the Iveagh Markets: ‘It’s going to turn into a jewel in the crown’ . These rates did not rise as much as ECB rates did, so their downward path is uncertain. The departure of KBC and Ulster Bank has left the two big banks – AIB and Bank of Ireland – facing just Permanent TSB and a string of smaller players in competing for business. Certainly some fixed rate offers of close to 5 per cent will look high as ECB rates fall – and should be reduced sooner rather than later.