Businesses heave sigh of relief at 'boost' for economy

REACTION:BUSINESSES, HOMEOWNERS and property professionals have warmly welcomed the latest three-quarters of a percentage point interest rate cut, which should mean cheaper loans, cheaper mortgages and cheaper houses for all.

Jim Curran, head of research with the Irish Small and Medium Enterprises Association (Isme), said the rate cut should bring badly needed relief to many smaller businesses, “particularly those who have bank borrowings in the form of term loans and overdrafts”. But he added that banks needed to pass on the benefit in full to their customers.

Isme is calling on the Government to impose sanctions, including a withdrawal of the guarantee scheme, on banks that refuse to pass on the rate cut.

Diarmuid Kelly, chief executive of the Professional Insurance Brokers Association, welcomed the cut, though he added that current market conditions warranted an even bigger one. “The lethargic response of the ECB to the global downturn is affecting the real economy,” he said, adding that his association was looking for the European Central Bank to cut rates to just 1 per cent.

The rate cut will also increase affordability for both homeowners and those seeking to make a purchase, and, as such, it is hoped that it will have a positive impact on the struggling property market.

Tom Parlon, director general of the Construction Industry Federation, said the move represented an “important confidence boost for the Irish economy”, while Marian Finnegan, chief economist with Sherry FitzGerald Group, hoped it would help re-energise the property market.

“The combination of this rate cut and the recent reductions in the price of residential property, of up to 30 per cent, bodes well for the realignment and reactivation of the residential market in the months ahead,” she said, although she added that it was likely to be early 2009 before the “positive impact is clearly visible in the market results”.

The latest rate cut is also good news for the beleaguered commercial property sector. Guy Hollis, managing director of CB Richard Ellis, Ireland, said the latest reduction would reduce financing costs in the sector.

Businesses and homeowners across the Border are also set to benefit, following the Bank of England’s 1 per cent interest rate cut yesterday. The Northern Ireland Independent Retail Trade Association hopes it will boost demand and kickstart the economy.