Interest Rates going up or down

D

Donnachain

Guest
Hi guys i just got my mortgage with EBS and i am not sure whether to fix it or leave it as variable. I havent a clue about interest rates rises falling etc would any one have any advice what they think will happen. my friend thinks they will go up because the euro is worth less and the banks are losing money and they dont have to drop the rates so they wont. like the recession in the 80's the interest rates went up to 17%?if anything i thought they would drop, any advice?
 
it's likely that ECB will keep the rates the same to-day and will drop them by up to .5% before the end of the year. It's also likely that Banks won't pass the full drop on to their customers.

So all the signs at the moment are that they are not going to go up in the short term but these things can change!
 
Given Germanys economic figures recently I think its more likely that the ECB will leave rates on hold for the forseeeable future.
 
There are plenty of threads on fixed v variable if you do a search. Don't base your decision on what people say about interest rates. Nobody knows. Basic rule of thumb is to stress test yourself and see if you can afford interest rates to rise by 1-2%. If you can, you are better off getting a tracker mortgage where you will be guaranteed to benefit from rate cuts unlike standard variable mortgages (check t&c of mortgage though). They usually work out cheaper than fixed in the long term. If you think you would struggle if rates rise, you might be better off fixing.
 
 
It is important to remember that while the ECB can change rates the banks are not obliged to follow suit. Many institutions in the UK are now going against BOE recommendations are charging more for borrowing.

It is only my opinion but the desire to take on a fixed rate is what has gotten the economy into the state it is. My advice would be stick with the variable or maybe a tracker.

The future will see banks charging more by charging higher interest on new mortgages especially those with mortgages of 80% or higher. And paying little attention to the ECB.
 

Most tracker mortgages are called trackers because they HAVE TO follow the ECB rate moves. Bank's however are not obliged to reduce (or increase) standard variable mortgages. I don't understand your point about fixed rate mortgages being the reason the economy is in the state it is. Yes mortgage lending across every product is going to be more expensive from now on but my advice is that if given the choice between a tracker with a fixed margin and a standard variable, always choose the tracker.
 

If you believe that banks won't follow future ECB rate changes it makes no sense to recommend a variable rate mortgage as the lending institution is free to apply whatever interest rate it sees fit . This is not the case with a tracker where the lender is obliged to charge a rate of the ECB base rate plus x basis points above the ECB base rate, where x would have been agreed at the outset of the mortgage.
 
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My point is that if the OP goes for a Fixed or a Tracker as opposed to his current variable he could well be charged a higher rate of interest than he is currently paying. The banks are charging higher interest rates, point spreads in order to cover their costs and risks. While right now he is a known quantity to the bank he may be reassess if applying for a new mortgage and consider a higher risk. In the next 2 years he could pay well over the odds for his change rather than sticking with a variable.

While you are correct in saying that a Tracker says a few points off the base rate, these few points are decided by the bank and while agreed at the outset of the mortgage, the bank can choose to reassess this at any time and call in the mortgage.

You may also find yourself in the same position as some this month, where their 2 year fixed ended, they had 100 or 110% loans and the banks are no longer wanting to take such high risks and are now insisting that people pay off enough to bring their loans down to 90%.
 

I am sorry but this doesn't make any sense. Most tracker products do not allow the bank to reassess the margin during the life of the loan. If they do, they are not really trackers. What do you mean 'call in the mortgage'? Banks have no right to call in a mortgage even if the LTV goes to 500% as long as you are meeting your mortgage repayments and banks also have no right to make you pay off capital above what is due to decrease the LTV. They can increase the rates for the increased risk (possibly) but can't suddenly demand capital repayments (again a good reason for a tracker).

There is no logical reason for choosing a standard variable over a tracker in the medium to long term after taking into account special discount deals.
 
The short answer is no one know. If we did we could make loads of money on it! Bbut thats not very helpful.

The facts are;
1) ECB has one objective and that is to control inflation in Europe.

2) Germany has the biggest influence on European inflation at present.

3) ECB has hinted that it is unlikely to change interest rates in the near future (what ever that means) as inflation is running well above the ECB target currently.

4) Due to the "Credit Crunch" some Banks have been increase mortgage rates anyway, as they are under pressure.

5) Any thing can change at any time and probably will.


The most important thing to look at when choosing Fix V Tracker V Variable is your personal situation.

Are you in a position now or in the future where you really need/would like to know what you are paying each monthis fixed? Are you likey to move in that time?

If the answser is YES i really need to know what i am paying each month is fixed and you are not likely to move with in the time frame then fixed could be your best option. Then you need to find the best fixed rate you can.

If you can cope with rates going up (say by 0.5-1%) and fancy the idea that they could come down then you might be beter with a tracker or variable. If you are likely to move then you might be better with a tracker or variable. Then you need to find the best product in this range.

In the future, if rates do look like they are going up to a level that you are uncomfortable with the you could always fix them, but you won't get the fixed rate you could have had before.
 
Sorry but your information is flawed. A bank or building society can request all or sum of a loan to be repaid any time during the life of the load. The bank does not have to provide a reason for this.

As I have now said 3 times, Variable or Tracker is the way to go. If the OP remains on variable he will continue to enjoy the low rates we have now. However if he changes he may be assessed as higher risk than he previously was and there be offered a higher rate tracker than his current variable and so be worse off. He would almost certainly be worse off on a fixed for 2 years.
 

Show me one case where a bank has called a mortgage loan where the borrower has not been in arrears. Are you telling me that my bank will call my loan if my LTV goes to 110% and I refuse to pay off extra capital? I am sorry but your information is flawed.

Again your information on variable v tracker is also flawed. The only mortgages rising at the moment are variable mortgages. People on trackers have not seen their rates move since the last ECB rate move. Variable mortgages in general during that time have gone up at least 25bp and are likely to go up more in the coming months no matter what the ECB do as they are based on Euribor and not the ECB base rate.
 
Worse off financially with a fixed.......BUT some people are prepared to pay a premium for knowing that nothing is going to change for a while.

Certain personal situations may suit this.
 
Mr DT said:
Worse off financially with a fixed.......BUT some people are prepared to pay a premium for knowing that nothing is going to change for a while.

Certain personal situations may suit this.
Click to expand...

Exactly. I probably paid more initially on my tracker mortgage compared to standard variable that was available when I first got it but I didn't like the idea of banks being able to increase rates whenever they wanted or not passing on the full reduction so I chose a tracker. Don't regret it now! And I would choose fixed if I was struggling to meet payments even if it meant paying more than a variable rate
 
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