It was announced today that the M3 measurement of the Eurozone money supply increased by more than was expected and that the German jobless total had decreased by more than expected.
Many commentators had expected that the ECB base rates would rise from the current 4% to 4.5% by the end of 2007. These two sets of data now make this much more likely and increases the possibility of interest rates rising to 4.75 by the end of 2007 and to 5% in 2008.
These rises are likely to affect affordability for many people and are going to make it difficult for people who already have very large loans.
How many more increases are likely over the next year or 2??
2 more .25 increases represents a mortgage increase of €100 per month on our mortgage. A third increase would see our interest repayments higher than what is being offered on 3 year fixed term rates
Am wondering should I take the pain now & fix for 3 years ?
What are other people doing / thinking ??
As ever - don't fix if you can afford not to, in an attempt to time the market, second guess the institutions and save money longer term versus a competitive tracker/variable rate. If you feel that rate increases will stretch you in meeting the repayments then maybe consider fixing for an appropriate period of time.
I know the banks stress tested our repayments but if they jumped to 5% would be under pressure. If I can't afford 4 jumps or 1% increase on top of the 4%, would that be a indicator to fix??