Good afternoon, it is February 10th 2021 and here is your economic and market update from BlackBee.
- VAT reduction for Retailers set to end this month but VAT reduction for hospitality sector to continue.
- New mortgage interest rates in Ireland second highest across euro area in December.
The current VAT reduction from 23% to 21% is due to expire at the end of this month and Minister for Finance Paschal Donohoe has signalled that the government does not intend to extend the VAT reduction. The lower rate of VAT was introduced last year to support retailers during a time of great difficulty. Although the reduced rate of VAT is set to expire, Mr Donohoe noted that retail businesses are receiving support through other programmes. The reduced rate for the hospitality sector of 9% is set to continue until the end of 2021. Mr Donohoe told the Oireachtas Committee on Budgetary Oversight that the EUs controversial fiscal rules had proved “their worth” in the current crisis allowing member states to cushion their economies from the incoming shock and has kept national finances in check allowing for big increases in spending now. The Department of Finance is forecasting a budget deficit of approximately €20.5bn this year with the potential to rise to €25bn if further waves of the virus trigger more stricter than assumed containment measures. (Source: Irish Times).
According to new figures from the Central Bank of Ireland, Ireland had the second highest mortgage interest rates across the euro area in December. The euro area average of interest rates on new mortgages stood at 1.29% while rates in Ireland stood at 2.76%. Fixed rate mortgages accounted for over 80% of new mortgage deals in December. The volume of new mortgage agreements totalled €955m in December representing an increase of 15% yoy and a 16% rise in comparison to November. It is also the highest monthly volume since the series began. The summer months had seen low levels of activity as the volume of new mortgage agreements for June, July and August were 35% lower than the same period in 2019. (Source: RTÉ, Central Bank of Ireland).
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Global Market Update
(as at close of markets 09/02/2021)