How do I know that the lowest mortgage rate now, won't be the highest next year?

B

buckfast

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Say for example I choose a variable interest rate mortgage, based on the lowest offer in the market at the time. Doesn't this only give me confidence for the very short term, ie perhaps the next year, that I am benefitting from the best rate? What's to stop the bank from which I drawdown increasing their rate and another bank (which was originally quoting a higher rate) reducing their rate - with the result that in such a short timeframe, I am no longer on the best interest rate?

Is it all a bit of a lottery or am I even thicker than I thought when it comes to finance?

Thanks and apologies for this basic question..
 
Hi buckfast,

you have is spot on - there is nothing to stop the bank you get a mortgage with raising their rates at will - look at the rate increases of all the banks over the past few years while the ECB were cutting rates.

In a normal market you would be able to switch to a cheaper provider if it made economic sense to do so - ie savings outweighed costs of switching over a reasonable timeframe, but you would still be running the risk of the bank you just paid over €1,000 to switch to upping their rates above the one you just left!
 
thanks Mr Vimes. On a similar note, if an interest rate is specified for a 90% LTV, and the same bank has a lower rate for an 80% LTV.

Say in 3 or 4 years time, what keeps the delta in these rates? If I qualify for and choose the 80% ltv, then does the bank always maintain the specific 80% ltv rate cheaper than the 90%, if you know what I mean?
 
Hi buckfast

In recent years the banks have moved from charging everyone the same rate , the standard variable rate to charging rates based on Loan to Value.

They tend to apply the same reductions to the different Loan to Value groups, but there is no obligation on them to do so.

Brendan
 
Thanks Brendan, when you say that they tend to apply the reduction, do they tend to apply the same increase?

This all seems a bit wishy washy to me. Why should the bank have the right to change rates so freely like this ( I accept that they should only in certain strictly controlled circumstances be allowed to do so ) ? The bank is making a profit from the consumer, it's up to the bank to take the risk..
 
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