A common question regarding mortgages is whether it is best to choose variable or fixed interest rates. Historically, it has often paid off not to fix the interest rate, but there are exceptions. Here we look at some of the arguments for fixing the interest rate or not.
When to fix the interest rate?
In any case, there are three ways in which it may be worthwhile to fix the interest rate:
1. When you want to be sure what the mortgage rate will be
For many households, home mortgages are a significant expense. If the household budget is tight and the mortgage is large, rising interest rates pose a threat to the household economy.
Many who choose to lock the interest rate do so for the sense of security it provides. If you lock in a reasonably low interest rate of say 5, 7 or 10 years without it feeling expensive, you can plan the economy more easily. Many are prepared to pay a little extra to be able to sleep well at night.
2. If you are going to stay for a long time
A prerequisite for fixing the interest rate is that you plan to stay for a long time in your home. If you think it may be relevant to move within the next few years, it is unwise to fix the interest rate. You can pay an interest rate difference if you settle a mortgage with a fixed interest rate in advance. How long you intend to stay can be indicative of how long you are to fix the interest rate.
However, sometimes you can move restricted loans to a new home. In this case, make sure of this before you commit the mortgage loan by talking to your bank. We can also advise when it is possible to move a bonded mortgage.
3. When mortgage interest rates are low
When mortgage interest rates are low, it may be a good idea to borrow. Historically, it has been difficult to time. Various experts and newspapers have often published their forecasts on how interest rates will develop.
Unfortunately, many are often wrong. A seemingly low interest rate has often turned out to be even lower. However, when interest rates are around zero or when they are minus interest rates, it may be worth considering the risk of interest rates falling much more.
Divide the loan into different maturities
It is also possible to divide the mortgage into different maturities. It is a good alternative to tying the entire mortgage to a certain fixed interest rate if you cannot decide how long you will be fixing the interest rate. For example, you can let a third of the mortgage loan have variable interest rates, fix the interest rate for one or two years for one third of the loan and allow the last third of the mortgage to be fixed for a longer period.
Low interest costs are most important
Whether you choose fixed or floating interest rates, the most important thing is to choose a mortgage with the lowest interest cost as possible. You can easily compare the mortgage rates of a large number of banks. We help you to lower your interest costs for free so you get more money over to others!