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
I guess it depends on where you live how mortgages work. Here in the US, the most common mortgage is a 30-year, fixed interest rate mortgage. Other countries might have variable ones due to higher degree of fluctuation of interest rates and currency valuation, etc.
But when banks raise interest rates on customers, they’re typically doing so in lockstep with the Federal Reserve or Central Bank raising rates that banks must pay to meet reserve requirements.
Latest Answers