When interest rates go down, it encourage house buyers to choose fixed rate mortgages. If you read previous articles about fixed or varying rate mortgage loan, you already know that varying rates remains a winning strategy for the foreseeable future.
Moreover, according to economists, varying rate will be the best option over the next few years. In this context, people who could benefit to choose fixed rate mortgage are those who have an aversion to risk.
But the financial context could be advantageous even for low risk people: even fixed rate loans are extremely low… Varying rates are likely to be interesting over the next few years or so, but interest rates will increase after. One reason of this increase could be inflation, but probably not before 2011.
Varying rates loans remain attractive even if banks were eliminated their savings to their customers.
Last fall, some banks have prompted people with varying rate home mortgages to freeze their interest rates by stating that rates would increase, which have not been the case… The deteriorating economy has brought down interest rates even more!
Thus, if right now you have a varying rate , you should resist the temptation to freeze you rate with a fixed mortgage. This way, you will keep the control because the current economic climate favors customers.
The best thing you can do during economic periods when there are low interest rates is to repay your home as quickly as possible. If you can repay half of your home before your variable interest rate increase, you will save a lot in interest costs and pay more on your principal.
To conclude, as you see, even if fixed rates are very popular, a low interest rate economic context favors varying loans. Don’t be one of those many unhappy customers because of their banks’ bad advices.
The only exception to this rule could but the owners that rent building: they should opt for a fixed rate mortgage in order to balance income with stable interest costs.
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