Fixed.  Variable interest loans: is this the solution to high credit rates?

Fixed. Variable interest loans: is this the solution to high credit rates?

An average increase in credit rates of 0.55% since the beginning of the year, with a very clear rise in March, banks now offering interest rates of more than 2% over 20 years (1.80% on average) … Mortgage is witnessing The market is an unprecedented situation since 2017.

In the face of many withdrawn credit files, due to the extremely low interest rates (the rates after which the bank is not allowed to lend money) and the debt ratio that must be respected (35% max), it appears that floating rate loans are starting to return, while the banks have been I gave it up a few years ago due to low fixed interest rates.

This is what mortgage broker MeilleurTaux.com has noticed since the beginning of July.

Interest rate varies according to market rates

In contrast to a fixed rate loan, where the interest rate remains the same for the life of the loan, the variable loan rate (or revisitable rate) is likely to change up or down, depending on the differences in the index used, generally the Euribor index,” the broker explains. Coffee.

Created by the European Banking Union (FBE), Euribor is “the average rate that European banks charge to lend money to one another,” broker Empruntis notes. The variable credit rate is reviewed every year, in accordance with the rates of the financial markets.

So it is impossible to know the total cost of credit in advance. Advantage: This allows you to get a higher interest rate than a fixed rate loan.

Variable loan at 2.20% over 20 years

Variable rate, yes, but capped. “Since the beginning of July we have seen the return of variable rate loans with a cap of ‘1’, and this will accelerate,” said Maël Bernier, Director of Communications at MeilleurTaux.

This is a variable rate loan, but the maximum rate is known for the entire term of the loan. “This currently makes it possible to get a 1.20% loan over 20 years, she explains, at a rate of no more than 2.20%,” so the head is “1” (+ 1 point max).

A product that, in her opinion, remains prudent for the borrower, since the variable rates “did not entail significant indebtedness at the time. It is worth it when the fixed rates are 2%”, she points out. In fact, this can make it possible not to exceed the rate of wear, and thus see your loan file acceptable.

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