SVR's - any merit in the following for the future

gnf_ireland

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I was looking at mortgage rates a few months ago, in Belgium I think, and I noticed that the the variable mortgages were all calculated within an agreed tolerance level.

For example, I would borrow 500k for 20 years at the following rates (figures made up):
=> 2.65 +/- 0% (effectively fixed)
=> 2.45% +/- 0.5%
=> 2.25% +/- 1%
=> 2% +/- 2%
=> 1.5% +/- 3%

Lets assume the movement is linked to say an individual banks cost of funds on date x - and movements are based on that up to the maximum allowed within the contract terms, and baselined quarterly for the following quarter


Is there any merit in this as an option? Would this provide both consumers and banks with a genuine level of protection from excessive interest rates ? People could then decide what risk appetite they genuinely have before signing up...



And a mandatory clause that in the event the mortgage is sold on, the rate defaults to the fixed rate [2.65% above], but the mortgage holder is given the option to clear the debt at an agreed discount [say 20%] - since the mortgage company are effectively changing the terms of the contract by selling it on. This would protect against sales to vulture funds or where banks move from the market completely and 'cost of funds' no longer applies.

Answers on a postcard please?
 
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