The downside to fixing the interest rate
November 15, 2019
Interest rates are so low today and are expected to increase in the future
A week ago, we wrote about how savings economist . This is despite the fact that so many experts and bank officials want to highlight the advantage of fixing interest rates at the moment. They base their argument on the fact that interest rates are so low today and are expected to increase in the future. But who are the big winners of the fixed interest rates? Historically, those who have fixed their interest rates have had to pay more than those who have had everything moving. In other words, it is the bank that profits from giving these advice. They not only get more income but also tie up the customer for usually three or five years.
Bank’s CEO was asked, at the beginning of the summer, about what he would recommend to borrowers to do with their loans. He replied that they should choose to have 50% of the loan at floating interest rates and 50% in the bond. The part that was bound he thought would be binding in five years. Answering this is next to a standard answer. Examined in August what the most common answer is when this question is asked to private economists at banks and this answer dominates strongly.
A couple who has a joint mortgage loan differs or if someone gets sick
What private economists do not mention or expect are changed family relationships during these five years. If a couple who has a joint mortgage loan differs or if someone gets sick, the loan may need to be redeemed. However, settling a tied loan involves expensive fees. The loan with the low interest rate has thus been turned into an expensive business. It is this fee that is called interest rate compensation and for which the banks have received a lot of criticism. There is a proposal that would regulate this for the benefit of the borrowers, but it is not yet decided by the government on this issue.
In addition, there are two disadvantages. Firstly, it is easier to negotiate with the bank with a large than a small loan. Secondly, one can quickly change loan institutions at variable interest rates to always have the loan of those who offer the lowest total cost.
More are fixing their interest rates
Although there are disadvantages with fixed interest rates, those who bind their loans increase significantly. Of those who had floating loans in July, 6% (according to the Svd) planned to tie up their loans within three months. This should be compared to 3% just one month before. Either way, the benefits are, after all, greater than the disadvantages. Or they have just been drawn from the general view that it is right now to fix the interest rate …