THE COST OF IRISH STATE BORROWING is currently at 7.741% this morning.
BusinessInsider speculates that economist Morgan Kelly influenced today’s price increase, as the UCD economist has warned of a new crisis looming for Irish banks – mass mortgage defaults.
In an article for the Irish Times today, Kelly says that Ireland could have ended the banking crisis “at a stroke” by terminating the bank guarantee on the grounds that three of the banks covered by the scheme had witheld information regarding their solvency.
However, he says now that €55bn in bank bonds has been repaid, “the possibility of resolving the bank crisis with bondholders is now water under the bridge”.
Kelly warns that increasing numbers of mortgage-holders are choosing to pay for food and other family obligations over their mortgage and predicts that there will be more defaults.
He suggests people are beginning to change their attitude to defaulting, saying that one family which does so is regarded as a pariah, but “if 200,000 default they are a powerful political constituency”.
He says that house prices are still being artificially propped up by 5% mortgages and if Ireland comes under direct control of the ECB next year, as he expects, then higher mortgage rates will further cripple the housing market.
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