If I borrow 200k from a bank or building society to buy a house in say 2018, why is the interest rate on that loan variable for the next 25 years? Shouldn’t it be the internet rate when the bank loans the money to me.
If the bank has loaned me money when interest rates are low, then interest rates go up, aren’t they just creaming off a whole load of profit from me?
In: 10
So it all depends on what the current rates are and trying to predict the future if you want to do a variable rate mortgage or a fixed rate mortgage
When we got our mortgage it was 2.4% , I got a fixed rate since I didn’t really foresee mortgage rates dropping to like 1% after a year or two which they ended up doing
But at the same time now rates are 7% so I didn’t get totally screwed by the rates rising like someone with a variable rate did
Most major banks will let you choose or have a different amortization period or maximum amount allowed to be paid off. A variable rate mortgage you may be allowed to pay off larger chunks at once but for my fixed rate I’m allowed at most 10% a year this way the bank always ensures it gets its money
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