Ireland takes Second Place in Highest Interest Rates of the Euro Zone

Ireland has fallen behind Greece of having the highest interest rates in the euro zone. Irish interest rates are currently standing at 3.04%. The average interest rate of the euro zone is 1.79%. The 2 per cent difference presents many differences and issues in Ireland’s economy and more specifically the housing market.

High interest rates affects spending of both businesses and consumers. The cost of borrowing money increases while interest rates also rise. Often, the higher the interest rates leads to less spending, borrowing and investing by businesses and consumers.

 

Why are Irish interest rates among the highest in the euro zone?

Enforcing security on a mortgage is much prominent and more complex here than in other countries of the euro zone. In other countries, it is common to seize a property when individuals cannot pay off their mortgage debts. Thus, interest rates are so high here to ensure that banks will enough assets to minimize losses if something were to go wrong.

Lending has become less attractive because the uncertainty of returns on loans. Because repossessions …

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Scary Chart: US Private Debt to GDP

The US Private Debt to GDP chart is one that concerns me, it spells ‘deleveraging for many years’ in big bold letters. You don’t need much more than this to get the picture. With households so heavily indebted – and consumer spending being the driver of the US economy, it is now wonder that QE2 and whatever else they try is to be expected.

The trajectory of the chart after major financial crashes (remember this is the ‘worst since the great depression’), has a clear path, and for that reason it is likely that we’ll see deleveraging continue on the downward trendline you can see forming above.

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