Question on ECB interest rates.

mickmac76

Hi
I just got my annual mortgage statement and I'm trying to figure out my future repayments. My mortgage is a tracker at the ECB rate plus 1.5% and I'm trying to figure out what my repayments will be when the ECB starts raising its rates. So I really have 2 separate questions that I would like opinions on.

When do people expect the ECB to start raising the interest rate and how fast will they increase them?

Given that the current rates can be viewed as extremely low and only came about because of an extremely bad and possibly once in a lifetime economic shock what would be considered a normal rate of interest for the ECB and what would be considered high, would 5.0%+ perhaps be considered high for the European economy?

I know no one can give complete answers to these types of questions, I'm just looking for opinions.

Merowig

https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html

JTMan

One forecast is here which predicts that ECB rates will be 0.50% in 2020. Could be widely off the mark.

mickmac76

I find it hard to believe that interest rates can stay at zero for that long although I wouldn't complain if they do.

Merowig

Greece, Italy, Spain and France have serious debt problems. If the rates go up some countries might have even more troubles than now to pay back their debts.

mickmac76

And who knows what will happen should Greece default. I noticed that Greece is in the headlines again over its debts.

Geuze

mickmac76 wrote: »

Hi
When do people expect the ECB to start raising the interest rate and how fast will they increase them?

Given that the current rates can be viewed as extremely low and only came about because of an extremely bad and possibly once in a lifetime economic shock what would be considered a normal rate of interest for the ECB and what would be considered high, would 5.0%+ perhaps be considered high for the European economy?

Hard to say.

It depends on inflation rates and economic growth.

If both of them pick up across the EZ, then expect rate rises.

I would not be surprised if rates rise from 0% in 2018.

A typical previous normal int rate was 4%.

Nominal int rate = real int rate + inflation
4% = 2% + 2%

However, real int rates have fallen to 1% or even 0%, so a new normal nominal int rate might be 3%.

mickmac76

A nominal interest rate of 3 to 4% would be fine with me espicially if it took a year or two to reach that level once the rates start raising.