BY JOHN ELLIS, FINANCIAL ADVISOR
The public-sector strike is over for now. The proposed second day of action was suspended, and both sides are back at the Workplace Relations Commission. That is welcome, but it does little to ease the pressure on household bills.
More than 300,000 public servants walked recently. Schools closed, hospital appointments were cancelled and people had to rearrange their day. The previous pay agreement expired in June. The Government set aside €1.2 billion in Budget 2027 for a new deal. The unions want more. The Taoiseach has said any agreement must be affordable and linked to productivity. The question is how far apart the two sides are, and who will carry the cost of a settlement.
There is another financial pressure building, this time on the Government itself. The National Treasury Management Agency recently sold €1.25 billion of 10-year bonds at a yield of about 3.5 per cent. It is the highest rate Ireland has paid for 10-year borrowing since early 2014, shortly after the country exited the bailout.
Most people never look at a government bond yield. It still matters. When the State pays more to borrow, there is less room for tax cuts, public services or further energy supports. Higher government borrowing costs can also influence the wider cost of borrowing, although mortgage rates depend on other factors too, including bank funding costs, competition and European Central Bank policy.
Families are already dealing with higher prices.
September’s inflation rate was 4.1%, the highest since January 2024, with energy a major factor. Home heating oil has risen sharply. Diesel has been above €2 a litre in many places. Electricity and gas bills have been going up. Against that backdrop, the tax-band changes in the Budget will be welcome, but a few hundred euro in extra take-home pay can disappear quickly when the oil tank needs filling, the car needs fuel and another electricity bill arrives.
There are also signs that some households are beginning to struggle with their mortgage repayments. Early arrears figures published by the Central Bank this autumn showed more than 12,000 family-home mortgages falling one or two months behind. It is not 2008. It is still a warning.
If the final pay deal costs considerably more than the €1.2 billion already set aside, the Government will have to explain how it intends to pay for it. Public servants face rising living costs too. But the more the Government spends on one commitment, the harder it becomes to find money for others.
The bigger question is how long higher government borrowing costs will last. Bond yields do not change household bills overnight, but they help shape the financial conditions in which the next Budget is drawn up, and future spending decisions are made. A 3.5 per cent rate on 10-year borrowing is not a crisis. It is, however, a different environment from the one that existed when many of today’s fixed-rate mortgages were agreed.
Households cannot control government borrowing costs or the outcome of the pay talks. They can, though, check when their own fixed-rate mortgage expires, find out what rates are available and consider whether their budget could cope with higher repayments.
The political argument will continue. The cost of borrowing is already higher, and that is worth keeping an eye on.
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