Family Budgets Hit by ‘Perfect Storm’

by Rachel Cunningham
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Rachel Cunningham

Dublin households are facing a ‘perfect storm’ of price increases, mortgage hikes and a return of runaway inflation which has put an enormous squeeze on their weekly budgets.

Mortgage holders are bracing themselves for the first of a series of interest rate rises from next month, which will see repayments jump by €50 per week for families paying a typical tracker mortgage.

Variable rates and future fixed rates are also expected to rise and the European Central Bank has indicated that its key lending rate may go up by 0.75 percentage points this September.

Read more in this weeks Dublin Gazette out in stores Now

Last week’s CSO figures put inflation at a 38-year high, with energy and fuel prices and the cost of the weekly shop, all driving upwards being felt in the pockets of Irish consumers.

A major contributing factor to the spiralling extra spend is the spiralling cost of energy prices both for house and car use. This week it was estimated that a petrol ‘fill-up’ now costs an average of €11 more than it did three months ago.

The situation has led to a major rise in families contacting the St Vincent de Paul (SVP) seeking help to meet with their weekly financial outgoings.

The government  has made it clear there will be no price caps put on energy costs

 But Tánaiste Leo Varadkar has pledged to look at increasing minimum wage levels as well as signalling the intent to  introduce a living wage by 2026, according to.

This plan would ultimately see the living wage replace the minimum wage as the lowest possible wage that workers in Ireland can be paid. The living wage will be set at 60 per cent of the median wage in any given year. Ireland’s current living wage is €12.17, nearly €2 more than our minimum wage of €10.50, but this is aniticipated to rise each year.

Following a report received from the Low Pay Commission, the proposals were signed off by Cabinet ministers on Tuesday, June 14. Minister Varadkar has stated that the process will involve a six-week public consultation, with decisions to be finalised in September before adjustments are made to the scheme in January 2023.

The Tánaiste said that the point of the change is to make sure that we “eliminate poverty for people who are at work”, adding that it would help to resolve the gap that has been widening between the average person and the person on minimum wage over the course of the past 30 years.

Bank of Ireland reported a significant drop in its savings and investment index in this year’s second quarter (April, May, June), with consumers now citing the war in Ukraine (32 per cent) and inflation (22 per cent) as their greatest sources of concern.

The bank reported a slump in consumers who are saving regularly, at a reduction of seven per cent between May and February. This drop in regular saving has been connected to the country’s rising inflation, with people being foced to dip into their savings and potentially also recognising that, with interest rates at near zero, savings may lose real value.

Consistent with international surveys, Covid-19 is no longer topping the list of concerns for customers of the Irish bank. It was cited by just one in 20 as their biggest worry, falling below cost of housing (13 per cent), climate change (11 per cent) and global recession (11 per cent).

The index also pointed to significant differences in concerns between generations. Inflation and cost of living is mostly troubling the core working population, aged 30-59, 27 per cent of whom cite it as their biggest worry.

This reduces to 21 per cent among 16-29-year-olds, while just 15 per cent among those aged 60 and over listed inflation and cost of living as their main sources of worry. Forty-six per cent of this cohort claimed to be more preoccupied with the negative implications of the Ukrainian war, while over one in four of under 30s responded that they were most worried about the cost of housing and rent.

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