When Interest rates rise, Who gets my money!

[eamonnmoran7]

OK, every 1/4% interest rate hike meant that I was paying about 100 euro more to the bank every month.
I know they didnt get that money, It was passed on to the ECB but my question is what do the ECB do with all the extra money.
Shouldnt this be front page news every day?
Why dont I know what is done with all that money?

 

[huskerdu]

Re: When Intrest rates rise, Who gets my money!

Hi,
The ECB does not get any of your money, they set monetary policy only. They are not actually a bank in the commercial sense of the word.

Your bank gets the extra money, but they have very likely borrowed from another bank to fund your mortage, so the rate of that loan will go up,
Also, the interest they pay on deposits goes up ( but maybe not as fast as the mortgage interest rate).

That is a very simple explanation of something that is much more complex, I am open to correction / further explanation.

 

[eamonnmoran7]

Re: When Intrest rates rise, Who gets my money!

Oh so if its not my bank its some other bank getting most of this extra money!
Democracy my eye, yet another example of legalised rackateering. Add Creditcard companies, Insurance and lots of others to the list.

And dont somebody tell me that the corresponding is true of deposits.
Unless a bank increases deposit interest at the same time and to to a fair weighted proportion then its a racket!

 

[ClubMan]

Interest is the "price" of money. Like any other price it can rise and fall in line with demand and supply and other factors. When it rises the "seller" (lender) gets the higher price. They are borrowing at wholesale rates so the difference is their margin.

Since you seem to want to just rant about this issue you should be posting in Letting Off Steam. You will need to wait until you have 50+ posts and 1+ months membership to do this. For now I am closing this thread.