Therefore, in order for you to break even then e.g. variable mortgage rates would need to rise to 6.6% (i.e. 2% above the fixed) for the same duration that they are currently 2% below the fixed rate e.gs if banks margin remains the same:
The ECB rate will be 1% for the next 2.5 years and then jump to 5% for a duration of 2.5 years.
or
The ECB rate will be 1% for year 1, 2% for year 2, 3% for year 3, 4% for year 4 and 5% for year 5. (i.e. averaging 3% for the next 5 years).
Your calculation above is based on two very flawed assumptions:
(i) the OP's variable rate could remain at 2.6% for the next 5 years. Clearly this is not going to happen. It is likely to increase to c. 3.1% in the next week or two and at least another .5 before the end of the year.
(ii) the ECB is the only factor which determines variable or fixed rates. As we have seen with PTSB, AIB, BOI and now EBS the rates they charge are driven not just by the ECB but by the cost to them of borrowing money and the requirement to increase profit margins. These two factors will continue to be the driving force behind the current and future waves of rate increases not the ECB rate.
Yes banks are aware of them but your calculation ignores them. You cannot compare one thing which is actual (fixed rate) against another thing which is impossible (variable rate remains the same) and expect a reliable conclusion.Banks are aware of all the above and factor it into their fixed rate.
In general terms, it will cost you money to pass on a financial risk to another party. The average person fixing their mortgage will pay more than if they did not fix.
In some circumstances such as insurance or life assurance, I agree that it will cost you money to pass on a financial risk to another party. However, this is a particular type of risk (actuarially calculated) and is entirely different from other types of risk.
On what basis do you make your assertion that "The average person fixing their mortgage will pay more than if they did not fix"?
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