BY JOHN ELLIS, FINANCIAL ADVISOR
Diesel has gone above €2 a litre at many petrol stations. The AA puts the extra cost for a typical driver at around €235 a year. Home heating oil is up 44% on the year. A 1,000-litre fill is about €550 dearer than last winter. Food, for once, is relatively stable, but the rest of the bills are not.
Inflation hit 3.7% in August, up from 3.4% in July. The CSO says housing, water, electricity, gas and fuels were the main driver, rising 8.5%. Petrol is 9% dearer, diesel 15%.
The suppliers have not waited either. Airtricity, Bord Gáis and Energia have all announced price increases for early October. Dual-fuel customers could be looking at another couple of hundred euro, depending on the supplier.
Planned excise increases on petrol and diesel, due this month and next, have already been pushed back. That is probably sensible. Adding another 9 or 10% to a litre now would have been asking for trouble.
Then came the ECB. On Thursday it increased rates by another 0.25% to 2.5%, the second rise in three months. Christine Lagarde, the ECB President, called it a “no-brainer”. Philip Lane, the ECB’s chief economist and a former Governor of the Central Bank of Ireland, speaking in Wexford the following day, said the inflation squeeze on households from energy was likely to get worse and left the door open for another hike before Christmas.
Tracker holders will feel it first. There are about 130,000 of them. The latest estimates suggest an extra €24 to €28 a month for every €100,000 borrowed. On a €150,000 tracker with more than 10 years left, Thursday’s increase alone could mean roughly another €200 a year. Mortgage interest in the CPI is already up more than 10%, and there will be pressure on fixed-rate deals too. The better three and five-year fixed rates will not be available forever.
Add it up and a household here can be hit three ways at once: the car, heating and the mortgage. That is before the electricity bill lands. Real take-home pay is not keeping up. The Central Bank has already said energy is eating into what people have left to spend.
On paper the country still looks fine. Domestic growth is holding up. Unemployment is around 5%. Households saved nearly €1 in every €5 of disposable income in the second quarter. That savings figure will be tested this winter. A high savings rate is not much use if it is being drained by oil and interest.
There is not a lot you can do about the price of a barrel of oil. There is something you can do about the bill. Review the energy providers. The October hikes are not identical. Dual-fuel, electricity-only and gas-only are moving by different amounts. Use a comparison site and see if you are still on last year’s deal.
Review the tracker and the fixed rate before the next ECB meeting, not after it. The banks did not all pass on the full rate increases in the last cycle. They may not this time either, but you will not know unless you ask.
In Kilkenny, A-rated homes have been selling at about 20% more than C-rated ones. A BER is no longer just something on a form. It is becoming part of the value of the house, because it is becoming part of the running cost.
Grants will not cover everything, and a deep retrofit is still a serious outlay. Even so, insulation and a better boiler will do more for a family on oil than another year of hoping prices ease.
The typical selling price here is around €350,000, and the second quarter was one of the busiest on the register. That is the good news. But it will not count for much if the mortgage is up and the heating oil and the car cost more to fill.
There is also a case for targeted help rather than another blanket payment. Why give the same payment to somebody on a large income in an A-rated home as you give to a household struggling to heat an older house with oil?
john@ellisfinancial.ie
086 8362633
