One week on, we can conclude that mortgage rates have been or are to be cut only to a limited extent. Variable interest rates are available in many forms and we will look at these in more detail taking the variable Rabobank rate as an example.

At Rabobank, you can choose from two different types of variable rate:
- the variable rate of 5.5% (as of 9 December 2008), or
- the 3-month EURIBOR + 1% mark-up rate.

The variable 5.5% rate may be altered by the Rabobank at any time. A cut in interest rates by the ECB does not mean that Rabobank is obliged to cut its variable mortgage rate. The level of this interest rate is determined by the funding costs for money. Funding costs comprise the market interest rate plus a credit mark-up (liquidity premium) plus a risk premium. The credit crisis has led to the liquidity premium rising substantially within the last year. 

You can also opt for a EURIBOR interest rate plus 1% mark-up. The EURIBOR rate is published in various newspapers and can also be found on page 542 of Dutch teletext. As of 9 December 2008, EURIBOR stands at 3.42%. Including the 1% mark-up, the mortgage rate based on EURIBOR is 4.42%. There is therefore a considerable difference between the 4.42% and the 5.5% rates. The question is whether Rabobank is currently charging its clients too much via its 5.5% rate, or whether the 4.42% rate is too low. This is difficult to answer as long as clients have no insight into the bank’s funding costs. 

The difference between the 5.5% variable rate and the EURIBOR plus mark-up rate (4.42%) warrants a decision in favour of the EURIBOR rate. All the more so as you can now follow the EURIBOR interest rate via newspapers and teletext. In the case of a current mortgage, you simply look up the EURIBOR rate on teletext every three months. Add 1% and you know what your interest payment will be for the next three months. A simple calculation, albeit with the proviso that Rabobank is entitled to increase the mark-up. A few weeks ago, it raised the mark-up from 0.8 to 1%. This does not apply to existing mortgages, however. If the mark-up on the EURIBOR interest rate is laid down in the mortgage contract, a bank cannot change this unilaterally. 

Our advice:
- if you would like a variable interest rate, opt for a EURIBOR plus mark-up rate;
- select a bank for which the mark-up cannot be increased once the mortgage contract has been concluded.