There are few who have been left unscarred by the hydra-headed nature of the cost-of-living crisis, but the impact that spiralling inflation has had on utilities, grocery bills and more is not the most pressing concern for Irish people.
According to this week’s Eurobarometer report, more people believe housing is the single most important issue facing Ireland with 52 per cent citing it as a key concern compared with an EU average of 8 per cent.
When it comes to housing, the most vulnerable cohort are the renters who this week face the prospect of evictions and homelessness.
Then there are the would-be renters who cannot pay the eye-watering sums the market demands and live, as a result, in entirely unsuitable circumstances.
Even renters who can pay often cannot find a place to live because supply is not there, while those who can afford a place to rent and can find one often pay through the nose for it.
Many in the rental sector are in trouble. So too are many homeowners and would-be homeowners.
Those looking to trade up to an even slightly larger home to accommodate a growing family and first-time buyers who have been given the green light to buy have to contend with soaring interest rates, dramatic price increases and a chronic shortage of supply.
Then there are the hundreds of thousands of people fortunate enough to have secured a home for the long term who are worse off by many thousands of euro each year because of interest rate decisions made in a boardroom in Frankfurt.
Clare*, a 25 year old, has had a decently paid job for more than three years and has already saved a deposit for a modestly sized house in north Dublin. She has a budget of about €320,000 and is just starting out on her journey.
[The ECB] is only charged with achieving an inflation target. It doesn’t care whether this hurts people— Edgar Morgenroth, a professor of economics at DCU
Clare is, however, already painfully aware of the challenges she faces. “The depressing thing is demand for houses in my price range is so high and the supply so small that they’re snapped up as soon as they come on the market,” she says.
Her decision to buy is less about a desire to put down roots and more about moving out of the home she grew up in and even more about avoiding the horrors of renting.
“I’d be paying pretty much the same in rent as what I will be paying in mortgage repayments, and it will be my own place and I won’t have a landlord who can evict me if their situation changes,” she says.
“Then at the end of however many years if I need to upsize or whatever at least I have equity there and I haven’t just lost all the money I paid.
“And there’s only so long you can live with your parents without feeling like you’re still 16. It’s hard to feel like you’re moving on in your life if you’re still in your childhood bedroom. I was looking at renting. But it’s terrible.
“There was one room in a house with seven others, a double room, for €1,300 a month which is more than my mortgage repayments would be. There’s obviously more affordable rooms, but you’re still paying €900 for a box where you can’t do anything other than sleep. You can’t even walk around the room, that’s how small they are.”
[ Holly Cairns says our generation is worse off than parents, but what about the huge benefits from modernity? ]
Clare knows it is “an awkward time to be buying because the market’s just so unpredictable. It was hard enough to buy a property before interest rate hikes and they are just adding fuel to the fire”.
She was “a bit excited” when her approval came through. “But then I saw how quickly houses are being snapped up because obviously there are people with more cash who can enter bidding wars so I am probably only at the very beginning of a long, frustrating and painful road,” Clare says.
The road will be more expensive with mortgage rates climbing sharply over the last 12 months as the European Central Bank (ECB) imposed rate increases taking the main interest rate climb from zero to 3.5 per cent in just eight months.
Those rate hikes have added €1,600 a year, or a 28 per cent increase, to the cost of an average tracker mortgage as those with larger mortgages are feeling greater financial pain. And that pain is not confined to the quarter of a million tracker holders. People on variable rates or planning to fix are also vulnerable, as are tens of thousands due to come off low fixed rates in the months ahead.
Edgar Morgenroth, a professor of economics at DCU, says the ECB is simply doing what central banks do. “It’s only charged with achieving an inflation target. It doesn’t care whether this hurts people. Their mission, simply is to make inflation near enough 2 per cent,” Prof Morgenroth says.
“So what do they have as tools? They have only two, they can reduce money supply which they have done and they can increase interest rates which they have done. And that’s it.
“Of course trackers were pretty attractive for a long time but now we’re paying the price. It does put people under pressure [and] I think we’re seeing that in the market. I think you will see fewer house purchases, and you will see prices moderating. But that’s going to put more pressure on the rental side, where people are caught everywhere. It’s a bit depressing, actually.”
When energy prices started to soar last year and fuel prices on the forecourts topped €2 a litre, the Government reacted fast with cuts in excise duty on fuel and universal energy credits. There has been little done to offset rising costs when it comes to housing.
Prof Morgenroth questions whether help is appropriate and suggests those who own houses are “probably the better off, although they might not feel like that”.
“But they are relative to, you know, people on social welfare or people [with] very low incomes in the rental market,” Prof Morgenroth adds.
The Government shares this assessment. While mortgage interest relief has been considered to offset rising rates, it has been discounted for now. According to a spokesman, the Government “is not ruling out further action to help homeowners in the budget depending on how things develop. We do, however, need to have regard to some considerations”.
It is a billion euro rip off of some very vulnerable people and you could say vulnerable people don’t have savings but many older people do and who’s sticking up for them?— Karl Deeter is chief executive of online mortgage firm onlineapplication.com
He points out that tracker holders “have experienced a large and sudden increase in monthly payments, which is causing considerable pain to many”.
“This increase does, however, follow a prolonged period of very low interest rates, and in many cases tracker rates now match those which other mortgages have been set at for many years.”
He says ECB rate rises were done to bring down inflation by reducing credit and demand. “The bank has cautioned against fiscal measures that counteract that as it could cause inflation to stay higher for longer which would be bad for everyone.”
Martina Hennessy, managing director of online mortgage brokerage doddl.ie, says the rate increases “are massively challenging” with a half a point increase adding upwards of €100 on to monthly repayments, depending on the size of the mortgage.
[ Crazy house prices: ‘I think it’s starting to resonate that millennials aren’t just complaining’ ]
“It’s really tough because it’s just a constant frustration in the market. People are going ‘Jesus, give me a break, like, when is this going to end?’,” Hennessy says.
She says it is difficult for people to find homes and with rents climbing it is harder to save. “Deposits are moving targets, because they still have to save 10 per cent and then they have interest rates on top of that so when they secure the mortgage, it’s less affordable. But the alternative is renting and the increasing uncertainty in the rental market.”
Hennessy warns that people with fixed rates are facing big challenges in the future. “It’s going to be the big shock. Even 12 months ago, an average fixed rate was around 2.5 per cent. Before the end of the year, they are going to be, in my opinion, of at least at around 5 per cent, so will effectively double for many.”
At least price increases might be easing with figures this week from daft.ie suggesting house prices fell by 0.3 per cent in the first three months of 2023, the first time in a decade a first-quarter fall in listed prices was recorded.
Karl Deeter is chief executive of online mortgage firm onlineapplication.com and while he accepts some mortgage holders – particularly those with trackers – are facing substantially higher repayments, they have had “eight years of basically a zero interest rate policy, which isn’t sustainable”.
Deeter says “one shining light from the last crisis” is that there are “tools in place to try and avoid wholesale meltdowns the next time around”.
“And I think now is kind of a good example of the next time around,” he adds.
When it comes to housing you can do two things. You can rent the money or you can rent the building— Karl Deeter, chief executive of onlineapplication.com
Deeter says strict lending rules have curtailed “people’s propensity to go mad” when borrowing, so “the likelihood of being on a fixed rate is much higher now than it was so, you know, there are people who borrowed in the last two, three years who will be coming off fixed rates into a different environment but they were all like super solid borrowers.”
[ How do you solve a problem like Ireland’s housing crisis? ]
One group which Deeter says is being “shafted” is those with money on deposit. “The ECB will pay a domestic bank 3.5 per cent interest for money on deposit but the granny who has 100,000 after her husband died is now left with 10 per cent less this year because of inflation and banks aren’t giving her or anybody anything in terms of interest on savings,” Deeter says.
He says every 1 per cent that Irish banks do not pass on to savers in terms of higher interest rates, is costing people cumulatively €1.5 billion. “It is a billion euro rip off of some very vulnerable people and you could say vulnerable people don’t have savings but many older people do and who’s sticking up for them?”
First time buyers are also being “kicked in the face the second they get on the property ladder”, Deeter says, but stresses that despite the struggles they are still better off than the renters.
“When it comes to housing you can do two things,” Deeter explains. “You can rent the money or you can rent the building. People who are renting have been screwed for the last six years.
“The people who borrowed money, not only didn’t suffer anything, but they were on the pigs back. The price to rent money now is higher but is still cheaper than renting the same property.
“There’s different ways of looking at a problem. The price to rent money is still really reasonable. It’s not great but the world’s not going to hell in a handbasket.”
Clare says she has not worked out how much more she will pay because she is buying now rather than last year. “Sometimes I think ignorance is bliss,” she says. “And as long as I know what I’m paying and it’s something I can afford, then I prefer to only know that because knowing how much I might have saved is just asking for misery.”
*Name has been changed