We have been asked a few times about fixed mortgage rates and why they are lower than standard variable rates at the moment.
This has been going on for a few months in the mortgage market and the reason is fairly simple, lending rates are going to drop over time.
The one year fixed rate has traditionally been one that is used to attract business to a bank or building society. They are often a loss leading rate and after availing of it the person goes onto a higher rate or another fixed rate so we have to strip them out.
But from the 2yr rate onwards you normally paid a premium over and above the standard variable rate. So what is happening?
Lower fixed rates mean that banks are going to capture a margin that is likely to decline in the near future. The Euro yield curve is below.
What you see is that it is negative (below zero) for many years into the future, in fact, it’s only hitting …