By RTE News staffWritten: 08/01/2016Follow @RTENewsRTE: The average rate of interest on debt has been going up steadily for years, but is the average rate going to rise further in the future?
The average rate on the outstanding amount of a debt is now 10.6%, which is down from 10.9% in 2010.
The average debt payment of about €10,000 in 2018 is now about €2,000 higher than it was five years ago, and is about half the amount it was four years ago.
The increase in the average debt level over time is largely driven by the introduction of credit cards and the rise in interest rates, but it has also been influenced by inflation.
In 2018, the average interest rate was 5.5%, while it was 5% in 2020.
It has been estimated that the average cost of a mortgage was €5,800 in 2018, and that it is €7,000 today, so the average amount owed to the State will rise in the next few years.
This is likely to lead to an increase in payments, as interest rates are expected to remain low and the average loan amount will remain the same.
The State is expected to be able to borrow about €20bn more this year than it did in 2018 and 2019, which means that the Government has enough cash to repay the debt to the public at a higher rate than it has ever done before.
It is the Government’s aim to raise enough money from the sale of the National Asset Management Agency (NAMA) in the event of an economic crisis, and will also be able, as part of its plans to reduce the deficit, to borrow more money from other sources, such as the Irish Nationwide Lottery Fund.
The current balance of State debts is expected at €1.8bn by 2021, which is an increase of around €5bn on the €1bn deficit in 2018.
However, there is a chance that the next instalment of the Irish Fiscal Responsibility Fund (IFR) may be able at some point to be used to help the State cover its debt.
In the meantime, debt service payments for the next five years will be reduced from 8.9pc to 7.3pc, and the Irish public will have to pay an additional €5.7bn.
This will be offset by an increase from the €5billion of funding provided to local authorities and community infrastructure projects.
It comes as a new study by the IFR found that the cost of debt in Ireland is currently set to increase by a whopping 40% by 2021.
A further 20% of the country’s debt is expected in 2037.