The 2% has almost nothing to do with how much the bank thinks the rate will move. The way fixed rate loans work is that the bank basically does a variable rate loan plus an interest rate swap. The 2% is the "price" of the swap.
Not keen to go in to how swaps are priced here but it basically looks at what the implied forward rates are and finds the fixed rate that is equivalent to all of the forward rates. This gets you to what is known as the "swap zero rate". Then transaction costs are added as well as costs for credit risk, market risk, counterparty risk etc. (Theoretically. Practically the retail division of the bank (the bit that you deal with) will have a fixed cost of funds from their treasury that already takes all of this into account and then the treasury team deals with all the risks etc.)
Not keen to go in to how swaps are priced here but it basically looks at what the implied forward rates are and finds the fixed rate that is equivalent to all of the forward rates. This gets you to what is known as the "swap zero rate". Then transaction costs are added as well as costs for credit risk, market risk, counterparty risk etc. (Theoretically. Practically the retail division of the bank (the bit that you deal with) will have a fixed cost of funds from their treasury that already takes all of this into account and then the treasury team deals with all the risks etc.)
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