where will variable rates end up

K

kildon

Registered User
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157
hi,

was wondering where people think that variable rates will end up?

most variable rates are around 3.5% today....will banks increase rates again by 0.5% again early next year to 4%?

will the banks add the ECB increase when they do come?

if ECB rates go to 3% or even 4%, rates will end up at 6 or 7%....should I factor this into my calculations for checking my mortgage affordability
 
kildon said:
if ECB rates go to 3% or even 4%, rates will end up at 6 or 7%....should I factor this into my calculations for checking my mortgage affordability
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I reckon standard variable rates could go to ECB + 3% which would suggest rates of 6%+ could occur in the medium to long term.

I wouldn't feel comfortable taking out a mortgage if I couldn't pay the mortgage should the interest rate go to 6%
 
10 years ago, when things were "normal", ecb rates were at about 4% with variable rate mortgages about +1.5%, so I would say over the lifetime of a mortgage you should be expecting 5-6% to be the "normal" rate.
 
tiger said:
10 years ago, when things were "normal", ecb rates were at about 4% with variable rate mortgages about +1.5%, so I would say over the lifetime of a mortgage you should be expecting 5-6% to be the "normal" rate.
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Things will not be "normal" for a very long time
 
i think the banks are aiming to have SVR's around 4.5% before any ECB rises, so in 2 years time 7-8% could be the norm. Once rates go over 4.5%, i dont think we'll see them below that for years.
 
I do work in the business to answer an earlier post but want to get other opinions as am deciding on a rate at present, 5 yrs fix looks best value at the moment....will the FR or Govt. step in at any stage to protect variable rate holders or will the banks have free rein to do whatever they need to do in order to make banks profitable as soon as possible, i.e. add on all ECB increases in the future

as far as I know, most banks when stressing mortgage rates do so at ECB + 2.5% to 3%....doesn't offer much protection to the bank or mortgage holder if rates go to 6%, 7% or even 8%........300k over 30 yrs at 4% = mthly repay of approx 1400, if rates were at 8% mthly repay would be approx 2,200
 
I know it's difficult to predict but when do you think ECB rates may rise? and by what %?
 
nigel27 said:
I know it's difficult to predict but when do you think ECB rates may rise? and by what %?
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Watch the inflation rate,once it starts to rise the Germans will push hard for a rise,the Germans are death on inflation,ECB rate will be 4% inside of 18 months.

Just a guess.
 
July inflation at 1.7% - highest rate since November 2008 (2.1%).

The core economic target for inflation at the ECB is 2%.
 
Anyone think they may allow inflation to go to around 2.5% before raising rates. 2% is the target, but raising rates quickly might do more harm than good. it wont be for long, but i think they may delay any rise once it goes over 2%.
 
I imagine that with the ongoing crisis with the Greek economy, the ECB rate will not raise drastically over the next couple of years as it could have a detrimental effect.
 
Cut out the guess work and use the market:

http://www.ecb.int/stats/money/yc/html/index.en.html

Select the instantaneous forward curve.

The rate is projected to rise by under 1% over the next two years (ECB of 2% approx).

In 5 years time the rate is projected to be almost 3% higher (ECB of 4% Approx), and this is close to its long term average.
 
If you take that it will go to say 3.5%, I'm guessing that the Irish bank variable rates back when it was at that level was about 1% above that (seeing as they were happy to give the 1% trackers back then). Whereas now some are 3%+ above the ECB. I guess the question everyone would like to know is how much above the ECB they will stay.

If you take the crazy Irish economy where money was flowing like water out of the picture does anyone know what the 'better/more stable' countries had at their interest rates when the ECB was 3-4% before?
 

To be fair that's still just guesswork, just because the curve projects it doesn't mean it will happen.
Nobody knows where rates will go, when they will increase or how high they will go up by. It's all guesswork, the future cannot be predicted with any great degree of certainty.
 
The ECB have an inflation target of below, but close to, 2%.

So the nominal interest rate should be about 4% on average over the long run.

That means SVRs of 6%-ish when the financial crisis settles???
 

absolutely, the point I'm making is that the market is the sum of all guesses/opinions, so rather than try guage what might happen from a few people's opinion it's probably best to use a result incorporating the opinions/guesses of the entire market
 
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