There are two theories about house prices. One is that they have risen too far too fast and are set for a fall when things go wrong. This could happen. For example, if the economy slows or interest rates start to rise inside the euro zone, after the creation of the single currency, then prices could quickly come off the boil.
But the other view is that we are moving to a European-type situation and that the move to the single currency will reinforce this. In most Continental EU states, home ownership is the exception rather than the rule for many families and renting is much more common. If the euro does bring low and stable interest rates, then this could further boost to prices here, moving them for once and for all out of the reach of many first-time buyers.
Certainly, in the short term, the move to the single currency looks certain to bring a fall in mortgage and other interest rates. And in turn this will support the housing market over the next year and perhaps encourage prices to new heights. If buyers get the idea that beyond this borrowing costs will remain low and stable, then strong demand for property could underpin these higher prices in the years ahead, although it is too early yet to forecast this with any confidence.
Your Mortgage
If you have a variable rate mortgage, then you should see repayments fall significantly over the coming months. This is because once the euro is created, then short-term interest rates across Europe will have to all be at the same level.
This means that interest rates charged to borrowers here will fall by between 1.5 and 2 percentage points in the months ahead. This would mean a saving of up to £40 per month on the cost of a £40,000 mortgage and £55 on the cost of a £60,000 loan. What happens to interest rates once the euro is formed is anyone's guess. They will be set centrally in Frankfurt in a new institution called the European central bank. The Irish central bank will have one vote, just like the central banks of all the other member states. So the level of interest rates will be set in relation to the overall condition of the economies across Europe. One change for mortgage holders is that longer-term mortgages at fixed interest rates will become more common. Already these products - widespread on the Continent - are coming on to the Irish market and they should be available after next year, as the Irish banks will be able to get the funds to lend on through access to euro financial markets.
Your Savings
You mean you have some? Most people will choose to keep their savings in Irish pounds initially, although the banks have committed to changing over accounts into euros for anyone who wants. However there would appear to be little advantage in doing this straight away and most people will probably change their accounts over in 2002, when the notes and coins are introduced. You may want to conduct some euro transactions from your account, of course, such as sending a payment overseas in the new currency, and this should be possible.
Most people's main way of saving is their pension. Once the single currency is introduced, pension fund managers will increasingly look towards investment opportunities in the other member states. These will become more attractive, as there will be no risk posed by swinging exchange rates. For the same reason, those who like to invest in shares and investment funds on their own behalf will also be increasingly directed by brokers to overseas shares and investment vehicles. And even Irish share and Government bond prices will be quoted in euros, although stockbrokers will probably still be willing to accept Irish pounds in settlement for purchases.
Your Job
Once the euro is introduced next January, some people will find that their employers are moving all their accounting systems into the new currency and will want to pay them in the new currency. This will particularly apply to larger European multinational subsidiaries and to companies who export heavily to other members of the single currency. This should not pose a problem, as Irish banks will translate the euro pay cheque into Irish pounds before putting them in the customers' accounts. However employees will want to be sure that any rounding from their current pound salary into euros does not mean that they lose out in any way. The advent of the euro will also bring other changes to the work- place. Economists have spent a lot of time talking about how the economy will cope with being in a single currency, when our major trading partner - Britain - remains outside. Employees who work in companies exporting or importing from Britain may find things getting volatile if sterling starts to swing about against the euro. The biggest danger to Irish jobs would come if sterling fell sharply, making it harder for our companies to sell to Britain. But companies selling elsewhere in Europe will have a new and stable situation.
Your Holiday
The first time many people will really feel the introduction of the euro is when they go abroad on holiday. From next January, the pound's value will be set against all the other euro members - there are likely to be 11 founder members in total. This will make it much easier to plan trips to most of Continental Europe and remove the difficulties caused by swinging currency values. However travellers to Britain will still have to change their money and, ironically, the currency changing huts will remain on the Irish Border. Banks here are likely to offer euro credit cards, although it remains to be seen how quickly they will catch on. It is up to the retailer what cards and currencies to accept, so euro credit cards will only become popular if they are accepted widely in holiday destinations. But if the demand for them grows, then so will the level of acceptance across Europe. Actually changing money to go on holiday to Europe will also become cheaper. The banks will still charge a fee, but the existing "spread" - the gap between the rate at which they buy and sell from the public - will disappear. Precisely how these charges will be structured has still to be decided and is a matter of continuing discussion in the EU banking sector.
