How Much Higher Can Mortgages Go: Interest Rate Ladder

On Thursday 10 September the ECB meets in Berlin, and roughly 98% of the market expects rates to go up again. So instead of another reaction video, here is something more useful. In November 1993, a few days after my father's funeral, my mother and I sat at the kitchen table and split a pile of unopened post between us. I opened a mortgage statement from AIB. The interest rate at the top of the page was 16%. I had no context for that number at the time. I have plenty now. This is the Interest Rate Ladder. Every rung the ECB has set since it was created in 1999, priced against the same loan so you can see in euros a month what each rate actually does to you. The benchmark throughout: €300,000, 25-year term, tracker at ECB plus 1%. We start at today's main refinancing rate of 2.4% and a payment of €1,486 a month. Then down the ladder, through the 2025 cutting cycle, the Troika years, the NAMA fire sales when Dublin yields hit double digits, six straight years at zero, and the negative deposit rate era when a friend of mine was paying €6,000 a month for the privilege of holding cash. Then back up. Through 2006 and the Celtic Tiger. Through 3.4%, where development appraisals stop working. Through Trichet's 4.25% hike two months before Lehman Brothers collapsed, probably the most infamous timing error in central banking. Up to the ECB's all-time high of 4.75%, set in October 2000 and still in place the morning I turned on a television in Barbados on my honeymoon and watched the second plane hit. Then further back than the ECB exists. Irish Central Bank rates in the 1980s running between 10 and 16%. Overnight rates that touched 100% during the 1992 currency crisis. A 12% mortgage, which on the same €300,000 loan is €3,160 a month. Then Volcker's 20% at the Fed, US 30-year mortgages at 18%, and three centuries of Bank of England history including Black Wednesday and the day George Soros made a billion. The numbers that matter: the swing from the ECB's lowest rate to its highest is 1.7x on your monthly payment. At the Bank of England it is 4x. At the Fed it is 4.5x. Anyone telling you 4.5% is a high rate has not looked at the history. The one thing in here you can act on is at the end. Stress test every deal at 2% above the rate you are offered. If it does not survive that, do not do the deal. Recorded at the end of July in Sotogrande, with a new introduction recorded this week ahead of Thursday's decision. LEARN MORE 👉🏼 https://epa-learn-more.scoreapp.com/ CHAPTERS 00:00 Thursday's decision, and a letter from 1993 01:51 Why a rate rise this week is close to certain 05:47 Giving up a 2.1% fixed to take on a 3.2% fixed? 07:09 The dilemma: pain now or pain later 09:20 The benchmark: €300,000, 25 years, ECB plus 1% 10:17 Where we are today: Rate 2.4% and €1,486 a month 11:10 The three ECB rates, and which one your tracker follows 13:22 Lagarde: this is not the end of tightening 15:05 The likely rate is 2.65% in September 2026 18:07 Rate 1.9% and the Lehman cuts 19:19 Rate 1.4% during austerity and the Troika 21:07 Rate 0.9% NAMA, double-digit yields, forced sales 22:33 Rate 0.0% and the everything rally 24:35 Rate -0.5% negative rates, when savers paid the bank 29:17 Rate 2.9% and the Celtic Tiger comparison 30:11 Rate 3.4% where development appraisals start to fail 31:18 Rate 4.25% the worst timed hike in central banking 33:00 Rate 4.5% Irish commercial property down 25% 34:07 Rate 4.75% the ECB's all-time high, dot-com and 9/11 36:21 What kills markets? (hint: its not rates) 37:30 Before the ECB: my father's 16% mortgage 39:16 100% overnight rates and the 1992 currency crisis 40:12 Rate 12% what collapse looks like at €3,160 a month 41:17 The Fed: Volcker breaks inflation at 20% 43:27 The 4.5x swing and 18% thirty-year mortgages 44:34 The Bank of England at 17%, Black Wednesday, Soros 46:36 The anomaly was zero, not today 47:50 Stress test at 2%, or do not do the deal Buy me a coffee: https://buymeacoffee.com/gavinjgallagher I am on Instagram:   / gavinjgallagher