Will Variable rate loans and Mortgages track ECB rate hikes?

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RichInSpirit

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I was just wondering if Variable rate loans and Mortgages track ECB rate hikes the exact same as tracker mortgages?

Or do they follow some other path?
 
Variable rate loans will not follow ECB rate changes exactly as trackers loans/mortgages do.
The lender is free to vary the rate whatever way they want, even in the absence of an ECB rate change.
 
Thanks for that Clubman.
So tracker mortgage rates could climb above variable rate mortgages in a series of rate rises.
 
RichInSpirit said:
Thanks for that Clubman.
So tracker mortgage rates could climb above variable rate mortgages in a series of rate rises.
Click to expand...
Possible, but unlikely in my opinion based on past experience. Often standard variable rates do track changes to ECB rates but a rate increase can be greater than the ECB rate change. Conversely, when ECB rates are falling the SVR rate decrease can be less than the ECB rate decrease, and sometimes delayed for several months. The terms and conditions of most, if not all, SVR loan agreements give the lender carte blanche to change the rate whenever and however they decide.
 
It was only something I was thinking about earlier.
I still have a tracker @1.15% over the ECB.
But in the past I had a variable rate bank loan of about 6% and 7% after being restructured.
 
Hi Richie

That is an ok tracker, but not a great tracker. If you want to post a reply in this thread, I will give you my 2 cents worth.

Key Post - Should borrowers with trackers consider fixing? (General guidelines)

It seems increasingly likely that we are going to see a series of rate hikes by the ECB in the near future. According to Philip Lane, ECB chief economist - "I think it’s clear that at some point we’re going to be moving rates, not just once, but over time, in a sequence." If the ECB raise the...
www.askaboutmoney.com
 
RichInSpirit said:
It was only something I was thinking about earlier.
I still have a tracker @1.15% over the ECB.
But in the past I had a variable rate bank loan of about 6% and 7% after being restructured.
Click to expand...
Are you comparing a tracker mortgage with a variable non-mortgage unsecured loan?
That would be an apples v oranges comparison.
 
1.15 over ECB is an incredibly good deal imho. That's not to say something like a 10 year fixed would be better at this point. If you could get Avant's 10 year fixed you'd be laughing all the way to the bank literally.
Personally I wouldn't bother shifting. Chances are if you have a tracker the last of which were in 2008 then you must have repaid a substantial amount of capital and not be that affected by interest rate rises.
I would focus instead in repaying the loan early on which there would be no penalty for you.
 
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lomber said:
I would focus instead in repaying the loan early on which there would be no penalty for you.
Click to expand...
A low margin tracker is practically free money when inflation is taken into account. I wouldn't be rushing to pay off such a loan unless there were other factors clearly making that the better course of action.
 
Brendan Burgess said:
Hi Richie

That is an ok tracker, but not a great tracker. If you want to post a reply in this thread, I will give you my 2 cents worth.

Key Post - Should borrowers with trackers consider fixing? (General guidelines)

It seems increasingly likely that we are going to see a series of rate hikes by the ECB in the near future. According to Philip Lane, ECB chief economist - "I think it’s clear that at some point we’re going to be moving rates, not just once, but over time, in a sequence." If the ECB raise the...
www.askaboutmoney.com
Click to expand...

Hi Brendan, I don't meet all the switching criteria as I (probably) have a fairly colourful credit rating (I haven't looked).

My tracker is now in 5 significant figure territory so interest rate hikes won't make that big a difference to it.

I was just talking to a business man yesterday who would have significant borrowings and a mortgage, all variable. And I was trying to second guess how interest rate hikes would affect him.
 
Hi Richie

No one should have a variable mortgage at the moment.
The Irish market is dysfunctional and all variable rates are very high - much higher than fixed rates.

So, at the very least, he should fix.

You probably should check your ICB record anyway. Just make sure it's correct, even if it is colourful. Even if you are not borrowing now, you might need to in the future.

brendan
 
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