What future ECB interest rates should we assume when deciding to fix or not?

You are missing the point of the thread entirely.

If someone is facing a decision whether or not to fix their rate, what assumptions should they make?

Brendan
Usually they should assume that the bank knows more that they do about the future path of interest rates. This is not always true, see trackers, but it is that safe assumption. Therefore fixing will cost you, the peace of mind it brings may be worth that cost.

As I posted at the time, 10 year fixes available at circa 2% last year were another instance of the banks knowing less than the public.

Or are you just collecting our guesses about future rates. Mine is that we will see close to but not above 5% in the Euro zone, with the peak reached before year end.
 
I started this thread back in May 2022 -

At the time, fixed rates as low as 1.9% were available to borrowers!

I thought at the time that the fixed rates then on offer were very attractive but I wouldn’t have guessed that the ECB main rate would hit 3.75% within a year.

Goes to show that making assumptions about future interest rates is fraught with difficulty.
 
Will the ECB follow the us feds with a .25% increase or bigger shortly ??
 
Be wary of mortgage intermediaries broadcasting to shred your tracker rate and fix. If inflation moderates significantly towards 2% rates could come back down faster than you could say brokers commission.
 

Breaking the persistence of inflation​

Speech by Christine Lagarde, President of the ECB, at the ECB Forum on Central Banking 2023 on “Macroeconomic stabilisation in a volatile inflation environment” in Sintra, Portugal​



The policy stance​

What does this imply for our policy in concrete terms?

We have not yet seen the full impact of the cumulative rate hikes we have decided on since last July – amounting to 400 basis points. But our job is not done. Barring a material change to the outlook, we will continue to increase rates in July.

And as we move further into restrictive territory, we need to pay close attention to two dimensions of our policy. First, our actions on the “level” of rates, and second, our communication on future decisions and how that is influencing the expected “length” of time that rates will remain at that level.

The Governing Council has provided orientation on both dimensions. It has stated clearly that “future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to our 2% medium-term target and will be kept at those levels for as long as necessary”.

Two sources of uncertainty affect the desired “level” and “length” of our interest rate policies.

First, since we face uncertainty about the persistence of inflation, the level at which rates peak will be state-contingent. It will depend on how the economy and various forces I have described evolve over time. And it will have to be continuously re-assessed over time.

Under these conditions, it is unlikely that in the near future the central bank will be able to state with full confidence that the peak rates have been reached. This is why our policy needs to be decided meeting by meeting and has to remain data-dependent.




(emphasis added by me) I think we can read that as saying that the increase in July will not be the last rise.
 
If you have not fixed and can tolerate the latest ECB rise then I would hold on to it. This from Investor Chronicle to me sums up the posistion. For me I am keeping the Tracker for what its worth.

European Central Bank: Thursday 14 September

Key policy rate: increased by 0.25 percentage points to 4 per cent

In a finely balanced decision, the ECB increased interest rates by 0.25 percentage points on Thursday. The move takes the key deposit rate to 4 per cent, the highest level in the central bank’s history.

Having stressed its “data dependent” approach in previous meetings, the decision was a close call. Recent releases have been decidedly mixed: the labour market remains very tight and wage pressures are easing only slowly. Headline inflation was flat last month, though the ECB's updated forecasts revealed higher expectations for inflation this year. Worryingly, there are signs that the economic outlook is worsening, and services PMIs have now tipped into contraction territory.

In a statement released after the decision, ECB president Christine Lagarde said that inflation was still expected to "remain too high for too long”, and added that policymakers raised interest rates to “reinforce progress” towards the inflation target.


As a result, economists interpreted today’s move as a signal that fears about inflation still outweigh worries on economic growth. After the release, Dean Turner, chief Eurozone and UK economist at UBS Global Wealth Management, said that though recent data has raised questions about the health of the economy it was clear "high inflation trumps these concerns”.

Nevertheless, policymakers may have implemented their final interest rate rise. Turner expects this to be the last hike from the ECB, but anticipates that rates will remain at this level until well into next year. Mike Bell, global liquidity market strategist at J.P. Morgan Asset Management, said that “with the business surveys indicating an imminent sharp slowdown in growth, the ECB are probably done hiking”.



If you ditch the Tracker it is gone for good.

(Mr Burgess - have you considered implied terms in contract to challenge the ditching of Trackers?)