Mortgages - why the difference?

[Diego Napier]

they do? the ECB has set their interest rate to 0% and money markets follow the central bank rate. im sure there's a number of other factors meaning German mortgage rates are traditionally below that of UK rates, currently the number one reason is the very low interest rate due to the state of the Euro.

Currently and yet they're still fixing it for 15 years! Your suggestion might make more sense if the rate was for 2 or 3 years.

 

[Igzilla]

The last time the BoE cut the base rate, my mortgage lender increased theirs to mop up the difference.

 

[Hugo Rune]

The correct answer, of course, is that additional turnover is needed to pay for the sector's drug problem.

"Across different industry sectors, accountancy, banking and finance was highest with 23 per cent of employees suspected or known to take illegal substances during or outside of work."

http://www.crosslandsolicitors.com/site/crossland_news/substance_abuse_survey_results_html_2016

 

[beorhthelm]

Currently and yet they're still fixing it for 15 years! Your suggestion might make more sense if the rate was for 2 or 3 years.

you can get ~3% fixed 10yr here, because the pricing is based largely on the current base rate, the current cost of financing the money, not the future cost. i couldn't tell the deep technical reasons for this, just saying that's the way it is.

 

[The Andy Naylor Fan Club]

I'm looking to remortgage at the moment and have been offered a 10 year fixed rate at 2.9%. I think that's a great rate to be on for such a period of time and gives us the security of knowing exactly what our mortgage payments will he every month for the next ten years.

 

[Titanic]

I'm looking to remortgage at the moment and have been offered a 10 year fixed rate at 2.9%. I think that's a great rate to be on for such a period of time and gives us the security of knowing exactly what our mortgage payments will he every month for the next ten years.

Sounds interesting... who is that with?

 

[KingKev]

Yield curve for € and £ are different, and banks have to broadly match funding and loan balance maturities to manage their overall structural balance sheet and liquidity risks (either in reality by borrowing long term or by hedging / taking swap positions). So the rates primarily will represent a higher long term cost of borrowing £'s vs €'s.
There's probably some structural difference in market pricing as well - e.g. Driven by regulatory costs, banks' ability to make profits in other product markets, differences in capital requirements, cost of capital and tax rates, bad debt expectations, servicing expectations of different consumer populations and level of competition etc etc. Very long-term fixes are still rate in uk, and lack of experience here may also lead uk banks to add a small additional risk premium in their pricing.
The long-term cost of funds will be the main element of the retail mortgage rate difference, though - if I'm reading the ECB yield curve correctly, 15 year rates for € are c 0.6% but £'s are around 2%....

 

[MattBackHome]

Yield curve for € and £ are different, and banks have to broadly match funding and loan balance maturities to manage their overall structural balance sheet and liquidity risks (either in reality by borrowing long term or by hedging / taking swap positions). So the rates primarily will represent a higher long term cost of borrowing £'s vs €'s.
There's probably some structural difference in market pricing as well - e.g. Driven by regulatory costs, banks' ability to make profits in other product markets, differences in capital requirements, cost of capital and tax rates, bad debt expectations, servicing expectations of different consumer populations and level of competition etc etc. Very long-term fixes are still rate in uk, and lack of experience here may also lead uk banks to add a small additional risk premium in their pricing.
The long-term cost of funds will be the main element of the retail mortgage rate difference, though - if I'm reading the ECB yield curve correctly, 15 year rates for € are c 0.6% but £'s are around 2%....

A well-thought-out, comprehensive, informed and useful post.

What the **** is happening to NSC?

 

[Tony Meolas Loan Spell]

I'm looking to remortgage at the moment and have been offered a 10 year fixed rate at 2.9%. I think that's a great rate to be on for such a period of time and gives us the security of knowing exactly what our mortgage payments will he every month for the next ten years.

Thats excellent. Yes as per Titanic who with?

 

[chimneys]

You can get a 5 year fix rate (till end July 2021) with HSBC at 1.99% (plus £1, 499 arrangement fee), but max 65% LTV and max £500k borrowing.

 

[tinycowboy]

You can get a 5 year fix rate (till end July 2021) with HSBC at 1.99% (plus £1, 499 arrangement fee), but max 65% LTV and max £500k borrowing.

I'm currently switching to this rate - couldn't resist.

 

[chimneys]

I'm looking to remortgage at the moment and have been offered a 10 year fixed rate at 2.9%. I think that's a great rate to be on for such a period of time and gives us the security of knowing exactly what our mortgage payments will he every month for the next ten years.

Leeds BS 10 year fix rate 2.75% plus £1, 499 fee, max 65% LTV/£500k.

 

[chimneys]

I'm currently switching to this rate - couldn't resist.

I'm tempted, but think its an indication of long term rates for a while yet. It also restricts overpayment to 10% pa.

If it gets to 1.75% will do it.

 

[The Andy Naylor Fan Club]

Thats excellent. Yes as per Titanic who with?

Sounds interesting... who is that with?

TSB. I believe Barclays are also doing something similar.

 

[The Andy Naylor Fan Club]

Leeds BS 10 year fix rate 2.75% plus £1, 499 fee, max 65% LTV/£500k.

I find out on Wednesday when I have a meeting but I don't believe the fee is that high with TSB.

 

[chimneys]

I find out on Wednesday when I have a meeting but I don't believe the fee is that high with TSB.

But according to your post above, the TSB rate is 0.15% higher? Always the rate v fee dilemma.

 

[The Andy Naylor Fan Club]

But according to your post above, the TSB rate is 0.15% higher? Always the rate v fee dilemma.

Fair point. I'm out at the moment and will have a look when I get home. Thanks.

 

[Bombadier Botty]

I agree. You can get a 15 year fix for about 1.5% which easily trumps any UK mortgage. As I say, international banks must have access to the same money.

1.99% for 2 years is approx the lowest you'll get currently over here I believe (may be wrong). Again, amazing 1.5% for 15 years!

 

[Bombadier Botty]

- should add the 1.99% rate is a no upfront fee whatsover rate so not as cheap a domestic rate as is probably out there.

 

[KingKev]

A well-thought-out, comprehensive, informed and useful post.

What the **** is happening to NSC?

Apologies, obviously I meant to have a dig at rip-off Beitain and bankers' bonuses. I blame auto-correct.