At the bottom of the Interest Rate Cycle?

The Indo are claiming yesterdays decision by AIB to raise their mortgage rates on 3, 5 and 10 year fixed products marks the end of the era of low interest rates. In truth mortgage rates didn’t fall as far in this down cycle, which was driven by banking solvency issues, as they did at the low-end of the last cycle (the bust). Other banks are bound to follow suit very quickly and the Indo are advising home owners to lock in at these low rates, while they are still available.

Euribor interest rate futures suggest that the ECB may begin raising interest rates later this year, or early next year. The implications for the Irish economy are dire, if the Eurozone generally enters a recovery phase with rising interest rates while Ireland languishes dealing with the fallout from the housing bust. Irish property prices are still in free fall and construction, once a major part of the Irish economy, continues to contract.

Adds: Derek Brawn, reports that the consensus estimate for inflation in Ireland for 2010 is -0.2%. In otherwords, if Euribor futures are accurately predicting the future path of ECB base rate movements, in 2010 Ireland faces both deflation and rising interest rates. Great news for savers and those with jobs and no debts, grim for everyone else.

No bio, some books worth reading – The Rational Optimist: How Prosperity Evolves – Matt Ridley .

Crisis Economics: A Crash Course in the Future of Finance -Nouriel Roubini, Stephen Mihm