5 More Interest Hikes

this is worrying

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1784725&issue_id=15310&printer=1

Irresponsible, sensationalist reporting.
I heard Jim Power on the radio this morning and he refuted the Indo's take on what he said. For the record, he said he anticipated three hikes this year. All he said after that was a caveat that it may not necessarily be the top of the cycle.
An irresponsible journalist twisted that into him saying that there will be a total of five hikes.
Look, no-one can look into the future, if people are that worried they can fix their rates. People ought to remember however that these things go in cycles, and when recession is looming across the eurozone, the rates will go the other direction........

amgd28 said:

Irresponsible, sensationalist reporting.
I heard Jim Power on the radio this morning and he refuted the Indo's take on what he said. For the record, he said he anticipated three hikes this year. All he said after that was a caveat that it may not necessarily be the top of the cycle.
An irresponsible journalist twisted that into him saying that there will be a total of five hikes.
Look, no-one can look into the future, if people are that worried they can fix their rates. People ought to remember however that these things go in cycles, and when recession is looming across the eurozone, the rates will go the other direction........

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You'd wonder as well if there's an agenda to get people to fix their mortgages. I've heard and seen that "recommended" a few times today.

KalEl said:

You'd wonder as well if there's an agenda to get people to fix their mortgages. I've heard and seen that "recommended" a few times today.

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Fixing your interest rate negates the impact of future rate rises on you (for your fixed term only, of course).

Now, if I were to buy in to your scepticism (I'm not sure I do, but I'll play along for debate's sake), I'd say that the more people who fix, the less impact on our happy-go-lucky economy that a sustained series of rate hikes might have.

Only thing is that I'm not sure that there would be enough people willing to fix to see off the pain that would accompany an interest rate of, say, 5%.

conor_mc said:

Fixing your interest rate negates the impact of future rate rises on you (for your fixed term only, of course).

Now, if I were to buy in to your scepticism (I'm not sure I do, but I'll play along for debate's sake), I'd say that the more people who fix, the less impact on our happy-go-lucky economy that a sustained series of rate hikes might have.

Only thing is that I'm not sure that there would be enough people willing to fix to see off the pain that would accompany an interest rate of, say, 5%.

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Fixing is a good idea for people who would struggle with rate rises. But it does suit the banks too...they are paid a certain premium now for something that may happen. Plus a customer's flexibilty regarding payment or switching provider is reduced.
Call me cynical, but when Jim Power's forecast were spun and you hear "fix fix fix" it's hard not to wonder. When I listened to him I thought he was saying we'd have two more rises and then who knows?

To be fair to Jim Power, Friends First (or their parent) are not in the business of lending (in Ireland), so he doesn't really have a vested interest in pushing fixed rates.

The Irish Mortgage Corporation guy is a different story though.

CCOVICH said:

To be fair to Jim Power, Friends First (or their parent) are not in the business of lending (in Ireland), so he doesn't really have a vested interest in pushing fixed rates.

The Irish Mortgage Corporation guy is a different story though.

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Oh absolutely...I meant Jim Power's opinions were being hijacked and used by people with an agenda.

And like everything, the devil is in the detail: and people eschew detail. I sat down and worked out that it would take int rates to go up by x4 before I would reach current offered fixed rate. But people rush into things based on this kind of crass journalism (is it just me or has the Indo gone down in recent months/year?) Do I really think that the bank with their team of economists are going to do themselves out of money by offering a low fixed rate? I dont think so!

thedarkone said:

Do I really think that the bank with their team of economists are going to do themselves out of money by offering a low fixed rate? I dont think so!

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The thing is that your bank don't lose if you win out by fixing your mortgage rate. They're only offering you what is available to them in the money markets (plus their own cut, of course).

Somebody loses out alright, but it isn't your bank.

I think for new buyers fixed may be a good option. For the first year at least as a lot of expense accumulates in the first year. Most of the one and two year fixed rates being sold by the banks compare favourably to the tracker and variable rates on offer. New buyers do not have sufficient equity in their homes to avail of the low margin LTV offers from NIB and the like.

However, I would wonder about the Indo's agenda here. They seem to be running a campaign to have stamp duty removed and this could tie into that. As counter balance the Euro futures funds market currently sees two hikes this year with an 11% chance of three hikes by year end. On the other side of the pond, the bond traders see a more than 60% chance of the Federal Reserve rate dropping from 5.25% to 4.75% by year end. Such a move won't encourage rate hikes over here. Furthermore, I read this morning that the VAT increase in Germany has slowed sales considerably.

If Independent News & Media really believe there are five more hikes due by year end they could make an absolute fortune for their shareholders shorting the bond market at these prices. Otherwise, presumably they are just scaremongering.

conor_mc said:

The thing is that your bank don't lose if you win out by fixing your mortgage rate. They're only offering you what is available to them in the money markets (plus their own cut, of course).

Somebody loses out alright, but it isn't your bank.

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Unless rates rise and hold after you fix and then everybody wins.

askalot said:

Unless rates rise and hold after you fix and then everybody wins.

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The guy who sold the money to the bank in the first place might be squirming a little. Although by then he'll probably have packaged it up and sold it off to the Asian markets.