ECB Tracker Vs EURIBOR Tracker

[BYG]

Hi,

I've been offered a tracker mortgage based on ECB rate and EURIBOR from 2 banks. One is +.75 above ECB and the other is +.65 above EURIBOR. I know at the moment the EURIBOR is way above the ECB but say they settle down how likely is it that the EURIBOR would come with in or equal to .10 of the ECB rate.

I know its hard to predict but as its a mortgage I have to think where the rates will settle long term once the current problems work themself out of the banking system. Does anyone know what the spreads were before the credit crunch any advice welcome.

Thanks
BYG

 

[CCOVICH]

It depends on what euribor rate is quoted-does it match the term of the mortgage? e.g. is it a 20 year euribor rate?

Historical euribor data can be found here.

 

[Sunny]

Euribor is always generally higher than ECB rates as it is an inter-bank rate and therefore reflects the extra risk involved on top of the base rate offered by the ECB. Under normal circumstances, it would not be much higher (about the 10bps I suppose but hard to say and haven't looked at the historical data) but as you said yourself at the moment, it is an awful lot higher due to liquidity concerns. Personally I would always pick the ECB tracker rate. I would say it is more in the banks interest to lend to you at Euribor+margin.