Rising Interest rates

K

Kevin5

Registered User
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Hi

I read in the independent today that interest rates are to go up tomorrow by 0.25 or 0.50 % in Ireland.

Stupid question now. Is this only in Ireland or generally accross europe ?

As I am in Germany and in the process of getting mortgage approval to buy an appartment over here and what to know will this interest rate rise stated in the independent affect me .

thanks in advance

Kevin
 
Generally across Europe - The european central bank decide that
There is no such thing as a stupid question every question is valid and deserves an answer
 
It's the ECB rate, so it affects all lenders in the eurozone — although not all equally, according to [broken link removed] Sunday Business Post article.
The structure of the markets in Ireland and Britain differs in that the bulk of mortgage loans are based on variable rates and not fixed rate mortgage loans,which are common across most of continental Europe.

Variable rates in Ireland are closely linked to short term interest rate changes by the ECB, while German mortgage interest rates are linked to the ten-year German bond on the long term sovereign debt market.

A ten-year fixed rate mortgage in Germany last week was quoted at an average of 4.8 per cent, said Christian Wallburg, a spokesman of the 19-member Association of German Mortgage Banks in Berlin. But as in Britain, German banks levy a standard margin of around 1 per cent on the cost of their funds. For the German banks the margin is loaded on the cost of the ten-year benchmark German bond, which was trading last week at 3.66 per cent.

"We have seen [a margin] of 60 basis points in the past on extreme competition,'' Wallburg said. Consolidation among German mortgage lenders has helped to drive out some competition and the economic downturn, which has led to more defaulting loans, has caused German banks to increase margins in the past year.
Click to expand...
[Edit: post crossed with bazermc's]
 
My understanding is that banks in the Eurozone borrow money from the European Central Bank at the same rate, currently 2.5% (although as mentioned this is set to rise today). Anything above this rate is the bank's profit and this varies from bank to bank as well as country to country.
 
Hel_n said:
My understanding is that banks in the Eurozone borrow money from the European Central Bank at the same rate, currently 2.5% (although as mentioned this is set to rise today). Anything above this rate is the bank's profit and this varies from bank to bank as well as country to country.
Click to expand...

I think banks can borrow from the ECB (or maybe their own countries Central Bank) but in reality most their borrowing is in the commercial markets. The ECB rate however influences the rates in the market which is why the banks rates tend to track it.
 
Hel_n said:
My understanding is that banks in the Eurozone borrow money from the European Central Bank at the same rate, currently 2.5% (although as mentioned this is set to rise today). Anything above this rate is the bank's profit and this varies from bank to bank as well as country to country.
Click to expand...

THe cost of Funds varies for different financial institutions also based on there credit rating
i.e if your bank has a AAA rating your COF will be less than if you have an A rating
to best of my knowledge no Irish bank has AAA rating
 
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