I want to get a loan and buy a house. I’ve read plenty of information in banking sites about the interest but i would be grateful if someone could make it clear for me what’s the difference in the fixed and floating interest rate in a 200.000 Euros mortgage loan
In: Economics
Well fixed rate is fixed and will remain the same for the period of the mortgage. You pay 5% now and in 20 years its still 5%. if market rates go up to 8% you are lucky since you only have to pay 5%. If it drops to 2% you are unlucky and have to pay more compared to others.
Floating means that it is linked to the current market rate. It is 5% now so you pay 5%. Next year it is 2% you pay 2% next year it is 10% you pay 10%.
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