ECB Interest Rates

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AliDesign

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Can anyone tell me if the ECB interest rates went up in September? I have been told that they didn't but my mortgage company put our mortgage up €100 "due to the ECB increase" (I'm on a variable rate). Can the banks only increase their rates if the ECB goes up or can they increase at their own leisure??
 
AliDesign said:
Can anyone tell me if the ECB interest rates went up in September?
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No.
I have been told that they didn't but my mortgage company put our mortgage up €100 "due to the ECB increase" (I'm on a variable rate). Can the banks only increase their rates if the ECB goes up or can they increase at their own leisure??
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If it's a standard variable rate mortgage then they can probably change the rate whenever they choose (check the terms & conditions of the loan to find out) but this will often be in response to ECB rate changes. Maybe you lender is only passing on the June ECB rate hike now?
 
They did increase the rate in June and have always hiked the rate from the 1st of the month when ECB changes unfortunately. It is very concerning that they put up the interest rate in Sept as they have only ever done that when the ECB changed. I am worried that this will become a regular occurance and the ECB freeze will be of no help to us. We are currently paying approx. €400 more per month than we were this time last year!!
 
Interbank borrowing rates have increased despite no change from the ECB due to the credit crunch, so many banks have raised their mortgage rates. I had thought this was only for new business, though.

Have you checked that the bank have not made a mistake?
 
AliDesign said:
They did increase the rate in June and have always hiked the rate from the 1st of the month when ECB changes unfortunately. It is very concerning that they put up the interest rate in Sept as they have only ever done that when the ECB changed. I am worried that this will become a regular occurance and the ECB freeze will be of no help to us. We are currently paying approx. €400 more per month than we were this time last year!!
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You should change onto a tracker mortgage if you want to follow the ECB rates. Banks are usually allowed to change the standard variable rate whenever they want and are likely to have done it in September as the banks funding costs have been rising on the inter-bank market.
 
See we're screwed because we're with a sub lender (Start Mortgages) and are trying to switch our mortgage to a bank at the mo to get away from the now 8.050% rate we're paying now. We have to stay on a variable rate to avoid any ridiculous charges for paying the mortgage off early to switch to another bank. We've been with Start for 12 months but the other banks are saying we have to be with Start 24 months before they will consider our remortgage! God knows what we'll be paying in 12 months time with all these increases!!
 
AliDesign said:
See we're screwed because we're with a sub lender (Start Mortgages) and are trying to switch our mortgage to a bank at the mo to get away from the now 8.050% rate we're paying now. We have to stay on a variable rate to avoid any ridiculous charges for paying the mortgage off early to switch to another bank. We've been with Start for 12 months but the other banks are saying we have to be with Start 24 months before they will consider our remortgage! God knows what we'll be paying in 12 months time with all these increases!!
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That explains it. As far as I know, sub-prime mortgage providers base their rates on Euribor (the inter-bank rate) which has been quiet a bit higher than the ECB base rate recently so they are passing on this expense to its customers. I think they have all done it and not just Start. Not sure what you can do except try and get back to a mainstream lender as soon as possible.
 
Start did increase their rate in Sept.

There is an article from the Business Post here:

[broken link removed]


Basically it says:

''Start explained to brokers that the price of its mortgage is quoted relative to Euribor, the European Interbank Offered Rate''.
 
Hi Ali Design,

This is a rule that Banks have that can easily be broken. If I were you I would arrange a meeting with the bank manager and write up a proposal outlining why you will be a good customer etc. Banks lend to people, if you build up a relationship with the bank manager you will have a much better chance. Don't give up yet. If you really want to move to a variable rate mortgage and you can put a good case forward then the chances are it will work out for you. Good luck!
 
AliDesign said:
See we're screwed because we're with a sub lender (Start Mortgages) and are trying to switch our mortgage to a bank at the mo to get away from the now 8.050% rate we're paying now. We have to stay on a variable rate to avoid any ridiculous charges for paying the mortgage off early to switch to another bank. We've been with Start for 12 months but the other banks are saying we have to be with Start 24 months before they will consider our remortgage! God knows what we'll be paying in 12 months time with all these increases!!
Click to expand...

Start mortgages are standard variable mortgages (as aposed to a Tracker mortgage), so they can change as they wish. As another poster said interbank rates (also called Euriborin Eurpoe) have been increased due to the sub prime crisis in the US. A variable rate is generally based on the Euribor rate plus a margin whereas a tracker directly tracks ECB rate. If you want to know where rates are going keep an eye on media report on interbank rates, Euribor (see www.fxcentre.ie for daily update) rates and to a lesser extend Libor (London interbank rates). I think it's unlikely (although not guaranteed) that Euribor rates will increase further except for increases in the ECB rate. There is a possibility that the ECB may resume with 2 more increases next year although this might not happen. To be on the safe side I would recommend budgeting for 8.550% (a 0.5% increase) over the next year. Then you can switch to a standard tracker with another bank which should be circa 5.0% - 5.5% (allowing for a 0.5% increase over the year). So in summary, don't worry too much but budget for 0.5% increase.
 
Thanks a million everybody for all your links and responses. Everything is a lot clearer now. Basically, I should get the hell out of Start as soon as I can!!
 
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