Interest rates rising again for loans

junii

Hi,
I saw this on the news on Monday. I don't know too much about this.
Can somebody explain what exactly the reason for these rises are?

Thanks.

SouperComputer

Well the ECB (European Central Bank) controls our rates. Long story short, they will continue to escalate for a while yet!

whizzbang

In general the ECB raises rates when they think prices are rising too quickely.

Prices can rise for two main reasons.

1) World prices have gone up, like oil for example
2) There is too much money around, like Irish house prices

If they think prices are going up too quickly they reduce the money supply by raising the interest rates. Raising the interest rates means banks will give smaller loans which means there is less money for people to spend.

That is a very rough overview and it is full of holes I'm sure but it gives you an idea of what they are trying to do. In essence they are trying to prevent the european economy from booming too quickly while also trying not to hold it back too much.

They aren't doing it specifically to annoy Irish mortgage holders in fact we are probably pretty low on their list of considerations. This is why we have had such low interest rates despite booming property prices here.

ste

whizzbang wrote:

They aren't doing it specifically to annoy Irish mortgage holders in fact we are probably pretty low on their list of considerations. This is why we have had such low interest rates despite booming property prices here.

Yea, if we had been high on their list of considerations interest rates would have gone up years ago. Our inflation levels coupled with our interest rates (as controlled by the ECB) have meant we've had practically negative interest rates for the last few years.

Irish house prices have increased further this month
http://www.rte.ie/business/2006/0628/houses.html

They just keep going up

kluivert

Plug a guess.

ECB are increasing rates to stabilise the Euro Currency to increase its strenght against the Sterling