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Reduced mortgage interest rates will leave homeowners about 700 euro a year better off, experts said

Reduced mortgage interest rates will leave homeowners about 700 euro a year better off, experts said

Reduced mortgage interest rates will leave homeowners about 700 euro a year better off, experts said

Homeowners will be 700 euro better off each year, 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 went on.

"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.

Mr O'Brien said eurozone concerns continue to worry consumers, which is hampering spending levels and preventing the economy from growing. He added that new thinking and greater ambition is needed, and there are practical steps the Government can take to support domestic activity - even in the face of stretched public funds.

The report also pointed out that the main cause of the unemployment crisis is a lack of consumer confidence and weak domestic demand. "Getting people back to work is the priority, but to do this we need a return to more normal, sustainable consumer spending levels," Mr O'Brien went on.

IBEC suggested that changes to pension rules allowing people to unlock some of their savings early would help kick-start spending as well as tax incentives to encourage home renovation activity and a new social welfare smart card to ensure child benefit payments are spent in the domestic economy.

PA