Tenant borrower cost gap widens while motor insurance costs rise

The gap between the rising costs of private rents and the reduced costs of mortgage interest rates widened last month, while motor insurance costs also rose, the latest consumer price survey showed.

The cost of renting and the costs of meeting interest payments on home loans have diverged for over a year as the spotlight fell on the big costs of standard variable interest rates in Ireland compared with the rest of the eurozone.

Housing shortages have driven up rents.

Mortgage interest costs fell 0.5% in September and are now 6.3% lower from a year earlier, the CSO figures show.

Private rents showed no signs of slowing as costs jumped 1.9% in the month and are 9.6% more expensive than September 2015.

The CSO’s consumer price index showed that prices across the economy fell 0.4% last month — the third successive monthly decline — and were unchanged from September 2015.

Along with rents, motor insurance costs have risen for some time, even as the prices of many other goods and services have fallen sharply.

After rising 0.2% in September, car insurance costs are 25.2% more expensive than a year earlier. The insurance industry has repeatedly said that the costs of claims had driven up insurance premiums.

Last month, the Competition and Consumer Protection Commission said it would investigate motor insurance firms for suspected breaches of competition law by effectively signalling price increases.

The CSO said that there were “notable” price decreases in the past year for furnishings and household equipment, transport costs, communications, and recreation and culture.

Meanwhile, education providers, health and restaurants and hotels appear to be able to pass on modest price increases to consumers in the past year.

In the month, there were price decreases for transport and recreation and culture, while the costs of clothing and footwear, housing, and electricity and gas costs rose.

All types of rents and insurance costs remain the standout features. Local authority rents are 3.9% higher than a year earlier, while the costs of insuring a motorbike though unchanged in the month are 5.8% more expensive than in September 2015. The costs of travel insurance have fallen 1.3% in the year.

Alan McQuaid, chief economist at Merrion Capital, said oil prices will decide inflation in the coming year.

“However, the big worry on the inflation front going forward may come with wages. The revised economic growth numbers for last year showing GDP up over 26% in real terms... in 2015 won’t help policymakers, as more and more people will be looking for a piece of this super-growth pie,” he said.