One meeting, every variable loan

Eight times a year, the European Central Bank meets in Frankfurt and sets its key rate. Banks lend and borrow around it, so loans and savings follow.

A variable loan is a base rate plus the bank’s margin. When the base moves, your payment moves, often within weeks. In Ireland, a tracker loan moves by exactly the ECB’s step.

From July 2022 to September 2023 the ECB raised its rate ten times, from −0.5% to 4%. On a €200,000 loan over 25 years at that rate plus 1.5 points, the payment went from about €750 to about €1,230 a month.

A fixed rate does not move with the meetings. It is set once, from what banks expect rates to be, and holds until the fixed years end. In 2021 the variable loan was the cheaper one.

One line in your loan contract says fixed or variable. In June and September 2026 the ECB raised its rate by 0.25 points each time. On that €200,000 loan, each step adds about €27 a month.

A variable loan follows the ECB’s rate within weeks. A fixed one waits until its fixed years end.