Govt takes over the Banks - Will interest rates rise?

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Darth Vader

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From what Iunderstand, alot of the bailout money is going to be pumped into the banks and the Government will effectively end up owning the banks.

Will this have any effect on mortgage interest rates? i.e will the government be able to force the banks to leave the rates alone as long as the ECB dont raise them or will it have no effect?
 
I think it's only a matter of time before ECB starts moving on rates - headlines in the indo yesterday suggesting that those on tracker mortgages face rates going as high as 5% when ECB moves - the govt will have no control over these rates
 
sally2007 said:
headlines in the indo yesterday suggesting that those on tracker mortgages face rates going as high as 5% when ECB moves
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It suggested variable rates could go to 5% next year but why let the truth get in the way of a good story? ;)

Variable rates are going up, that is a certainty. If you are on a variable and can fix then do so.

www.moneybackmortgages.ie
 
Leaving the ECB interest rates to one side, as it is not now a source of funding, if the government or Ireland has been bailed out at a blended rate of 5.83%, then it is only logical that the retail borrowing rate passed on to consumers must exceed that figure.

In the past couple of years, the banks have sourced short term funding at 1-3% and have then passed on retail rates in the order of 3-4% to consumers. But that short term funding source is now gone, the ECB has stopped lending to us, and the only source of funds for us is the 85bn bailout package.

It seems now that the only option for Irish banks is to pass on all new debt at a rate higher than 5.83%, probably around 7-8% in order to make a margin. Karl Deeter touched on this point in his interview on the RTE News @9 last night.

Furthermore, there is a risk that the tracker rates could be removed, depending on the specific "force majeure" clauses for each bank. Where a bank is insolvent or nationalised, perhaps such a clause could be invoked? They'll find some way around the tracker problem.

My own personal view is that there is some short term funding available as part of the bailout package to delay any such rapid rise in interest rates for consumers, but over time, it surely will have to move to our local market rates of 7% + for all borrowers (trackers and otherwise).

The low-cost credit days are over.
 
Bob_tg said:
it surely will have to move to our local market rates of 7% + for all borrowers (trackers and otherwise).
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Easy on the scaremongering!

If trackers are taken away, there will be a revolution. Maybe that's what's needed.

Bondholders took a gamble, lost and still don't feel the pain.

Tracker holders took a gamble, won and get that taken off them. No way.

I will start that revolution :cool:
 
sally2007 said:
I think it's only a matter of time before ECB starts moving on rates - headlines in the indo yesterday suggesting that those on tracker mortgages face rates going as high as 5% when ECB moves - the govt will have no control over these rates
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I really do not think that the ECB rate can raise dramatically for the next 3 years at least. Europe is in a complete financial crisis right now with coutries such as Ireland, Spain, Greece and Portugal, to name just a few, being on the verge of imploding. A dramtic raise in the ECB rate would plunge these countries into even further crises.

Obviously, the ECB rate will increase at some stage. However, I believe that it will be a slow increase that will not happen for a few more years. It will be A LONG TIME before tracker rates are 5%!
 

I'm on 2.95% fixed until Mar-2011 and already worried about what will happen then.....god knows what rates will be offered. And at Mar-2011 we'll be only 2 years into the mortgage. I'm already saving for when the rates invariably go up.
 
jasonr said:
Tell me again what gamble did tracker holders take?
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That ECB rates would stay low compared to interbank rates. There was a time not so long ago when variable rates were actually cheaper than tracker rates.

The ECB rate was at 4.25% back in August making trackers unattractive but some people gambled and stuck with them while others fixed and lost out.
 
NorfBank said:
Easy on the scaremongering!

If trackers are taken away, there will be a revolution. Maybe that's what's needed.
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True that this could be perceived at scaremongering, but somebody somewhere has to take a hit.

It will not be acceptable for variable rate and fixed rate holders to be on rates of 7-8% while tracker holders are on 2-3%. That in itself will cause a revolution.

This is a very tricky one politically to avoid another revolution (remember the pensioners??), but I think the end point is inevitable: consumer interest rates will be significantly higher for everyone by mid next year, because of our bailout package and regardless of the prevailing ECB rate.
 
Bob_tg said:
It will not be acceptable for variable rate and fixed rate holders to be on rates of 7-8% while tracker holders are on 2-3%. That in itself will cause a revolution.
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I don't see why, most variable rate and fixed rate mortgage holders had the opportunity to take a tracker mortgage but for one reason or another didn't.
It was their choice.

Taking trackers away is not choice.
 
What can be in my contract that can allow them to take away my tracker? My understanding after reading it is that it is mine for life.
 
If there is no European Central Bank, there cannot be an ECB +... tracker.

Simple as that.
 
So lets say that happens, then my bank could turn around and tell me my new % and I'd have no say whatsoever? Like it or lump it?
 
NorfBank said:
If there is no European Central Bank, there cannot be an ECB +... tracker.

Simple as that.
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If there is no ECB then I would suggest loosing your tracker would be the least of your worries as it would imply the entier European banking market and banks have collapsed.
 
elefantfresh said:
What can be in my contract that can allow them to take away my tracker? My understanding after reading it is that it is mine for life.
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The banks also had contracts with bondholders. Although the government are adamant that there will be no default, the bond markets are pricing one in regardless.

It is surprising that there has been next to no talk of the banks defaulting on their agreement in relation to the tracker mortgages.

Are tracker rate mortgages any more secure than bonds??
 
Banks loaned mortgages and borrowed bonds, the two are not really comparable security-wise.
 
I am pleased to advise that trackers are designed to last beyond the ecb. Their terms usually provide that if ecb rate ceases to exist they will track whatever replacement base rate comes into being.
 
NorfBank said:
Easy on the scaremongering!

If trackers are taken away, there will be a revolution. Maybe that's what's needed.

Bondholders took a gamble, lost and still don't feel the pain.

Tracker holders took a gamble, won and get that taken off them. No way.

I will start that revolution :cool:
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i'll be right behind you.. couldnt survive without being on that tracker.. id rather throw my house at them!!!!!!!!
 
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