As many as 80,000 borrowers will have to tighten their belts if interest rates rise even modestly further, according to a joint study by IIB Bank and the ESRI.
Roughly 40 per cent of borrowers surveyed reckon their financial position would deteriorate substantially if interest rates rose by 1 per cent, the study found. As many as 80,000 borrowers would be hit by another half per cent rise in interest rates.
The study estimates that some 50,000 of these are already feeling the pinch from recent rate rises and will suffer further as the ECB increases interest rates in response to growing inflationary pressures.
The spectre of higher interest rates is already having a dampening effect on consumer borrowing, according to David Duffy, an economist with the ESRI.
Mr Duffy noted that less than one in five consumers indicated that the higher value of their property has encouraged them to increase their borrowing. "In fact, over the next two years the aim for nearly one in five consumers is to reduce the size of their mortgage debt,' said Mr. Duffy.
Austin Hughes, chief economist at IIB Bank, noted that "in broad terms, the financial position of Irish households remains very strong. Their bank deposits and the value of their houses are about 4½ times larger than their borrowings".
However, Mr Hughes did note that these aggregate figures conceal substantial differences in personal circumstances.
"There has been a clear deterioration in the situation of low income borrowers as interest rates began to increase. In addition, many of those in their 40s also face difficulties because while they are asset rich, many are also cash poor at present," he said.