More Home with Fixed Rate

Fixing the interest rate on your loan can be a good idea if you want predictability in your finances. A fixed-rate loan allows you to lock in the interest rate, so you know exactly what your loan costs will be during the fixed-rate period – although it may cost slightly more. This applies regardless of how mortgage interest rates in the wider market develop. This means you do not need to worry about interest rate increases during the fixed period, but you also miss out on interest rate reductions.

Loans with a variable interest rate, for example, can change throughout the loan period. This does not happen with a fixed-rate loan.

You can fix the interest rate for three, five or 10 years.

A fixed-rate loan may suit you if you want to protect yourself against potential interest rate increases and prefer the same, predictable loan costs each month. A fixed rate can therefore be a good choice for you if you are thinking long-term and do not want changes in your loan costs.

A fixed-rate loan may also suit you if you want to explore the possibilities for a loan that takes your future finances into account. Since your costs for the fixed-rate loan remain the same over time, we can calculate how much you can borrow based on expectedincome and stable loan expenses during the fixed-rate period. This means you may be able to borrow more than with a variable rate, because the bank considers how your finances may develop – not just how they are today.

A fixed-rate loan therefore gives you both predictable borrowing costs and the opportunity to borrow more, which can be useful if you have plans to buy a home and expect your finances to improve.

Whether a fixed-rate loan is right for you depends on your needs and financial plans – the most important thing is that you choose a loan that suits your situation.

A premium or discount arises if you wish to terminate a fixed-rate loan before the agreed time, or if you make changes to the loan – such as extra repayments or obtain interest-only period(s).

Premium means that the interest rate you have agreed is higher than the market rate at the time you wish to terminate the loan. You must then pay compensation to the bank for the interest loss incurred on the loan granted to you.

Discount occurs when your interest rate is lower than the market rate. In this case, you may receive a financial benefit by terminating the loan early, as the bank 'profits' from your early repayment.

On a fixed-rate loan, the interest rate is locked in until a specific maturity date, which is three, five or ten years in the future. When the fixed-rate agreement expires, the loan automatically converts to a variable rate, unless you have chosen to fix the rate again.

You may still have the option to switch from a fixed rate to a variable rate before the maturity date, but this may result in additional costs if a premium arises. You can contact us, and we will review the options for your loan together with you.

A fixed-rate loan can be both more expensive and cheaper than a loan with a variable rate. It is difficult to calculate what will be more cost-effective in the long run – which is why advice is rarely given on whether to fix the rate with the intention of making a profit.

A fixed rate is like insurance against interest rate increases – you pay for the predictability it provides. If the variable rate remains low over a long period, the fixed-rate loan may become more expensive. At the same time, a fixed rate gives you peace of mind against sudden interest rate spikes. It comes down to what is most important to you: the lowest possible cost in the short term, or financial predictability in the long term. However, remember that fixed rates have historically been more expensive over time.