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Variable interest rate

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  • 21-07-2009 9:44pm
    #1
    jeepers101
    Registered Users Posts: 707 ✭✭✭


    Anybody know if Permanent TSB's variable interest rate is fixed at a certain percentage above the ECB base rate. It currently stands at 3.1%, so if the ECB rate goes up to say 5%, will TSB rate increase to 7.1%?


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    #2
    ManAboutCouch
    Registered Users Posts: 225 ✭✭ManAboutCouch


    What you're describing is a Tracker Mortgage, where there is a fixed margin between the ECB rate and the rate charged by the bank. These are not available anymore (a sign that the banks are losing money on them at the moment - with interest rates being at historic lows)

    The gap between the ECB rate and a bank's Variable rate is decided by the bank. If you are stress testing your mortgage payments for a time when rates are higher I think that a 2.1% margin over ECB is a reasonable number.


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    #3
    jeepers101
    Registered Users Posts: 707 ✭✭✭jeepers101


    ManAboutCouch wrote: »
    What you're describing is a Tracker Mortgage, where there is a fixed margin between the ECB rate and the rate charged by the bank. These are not available anymore (a sign that the banks are losing money on them at the moment - with interest rates being at historic lows)

    The gap between the ECB rate and a bank's Variable rate is decided by the bank. If you are stress testing your mortgage payments for a time when rates are higher I think that a 2.1% margin over ECB is a reasonable number.


    I know all this but is it fair to say that the variable rate will always be about 2.1 over the base rate? Lets say for arguments sake the ECB rate went to 10%, would TSB variable definitely be more than that?


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    #4
    Senna
    Registered Users Posts: 8,800 ✭✭✭Senna


    Whatever the ECB rate is, the standard variable will DEFINITELY be higher, this is the banks margin, this is the amount of money they are making on your mortgage. Its possible that the standard variable will always be 2.1% more than the ECB rate, but its also likely that when the ECB rate rises banks will look to add on slightly more of a margin for themselves.

    Example;

    ECB rate 1.5% SV rate 3.6%
    2% 4.2%
    2.5% 4.7%
    3% 5.3%
    5% 7.6%


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