Now would be a great time to take out a mortgage for the next ten years. The interest rate is historically low and it has been so for a few years now. In Talouselämä’s article they were investigating which interest would be the best in the borrower’s point of view, if they would choose from either ten year fixed rate or the one year euribor. The euribor is very difficult to predict so the percent is in the article the same as the earlier 10 years interest the other way around.
Ten years fixed rate means shortly that the interest will stay the same throughout the whole loan period. The Euro Interbank Offered Rate also known as euribor, is determined everyday by European banks trading. This means that every year the interest could be different.
In the article the loan is 100 000 euros, the ten year fixed rate is 1,25 present plus the marginal percent 1,20%, making it 2,45%. The marginal percent is based on the client’s ability to pay back the loan as well as their collateral and the financial position. The one year euribor percent you can see in the next table.
Source: Nordea, Olli Kärkkäinen, Finland’s Bank.
The conclusion was that if you take out the euribor interest you will buy less than 2 100 euros of interest compering if you take the fixed rate. This was of course only speculation and no one really knows what will happen to the interest rates in ten years’ time. Usually mortgage loan’s time period is longer and the rate would be in that case even higher.
Taking a mortgage can be a big decision for some people and not knowing what the rates for the loans will be may worry some. Many Finnish loan takers however takes the euribor interest and only a few the fixed rate. A lot of people don’t think the loan as far as for the next twenty years. If the rate is low now it can feel more tempting and a few really thinks what the rates will be later on. One always should find out different banks different interest rate and their margins for one’s loan and in this way find the best mortgage for them.