Saturday 21 October 2017

Donal O'Donovan: The shift to fix comes with a period of volatility on the cards

'The miserably low rate of house building means that too few people are getting the keys to new homes to allow the banks to grow at any kind of a healthy pace.' Stock image
'The miserably low rate of house building means that too few people are getting the keys to new homes to allow the banks to grow at any kind of a healthy pace.' Stock image
Donal O'Donovan

Donal O'Donovan

Ulster Bank's move to cut the prices of fixed-rate mortgages will shift the market here farther from the long-standing bias for variable rates - something that makes us unusual in Europe.

Whether the bank is being led or leading its customers to fix, the context is fairly clear. Interest rates, after a decade of largely downward travel, are set to rise as the eurozone economy recovers. It's something that is now on the minds of borrowers and lenders.

How the ECB acted in the past suggests that as rates do start to change in the next 12 to 36 months, the journey may not be smooth. A period of interest rate volatility, rather than a simple shift higher, may be on the cards.

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