Mortgage: Love it, hate it, you will probably need it.

n-mortgage-628x314http://www.huffingtonpost.com/jack-m-guttentag/mortgage-repayment-questi_b_9278698.html

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.

Year Month Percent
2016 August 0,00 %
2017 August 0,16 %
2018 August 0,47 %
2019 August 0,54 %
2020 August 0,88 %
2021 August 2,10 %
2022 August 1,42 %
2023 August 1,33 %
2024 August 5,32 %
2025 August 4,67 %

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.

Sources:
Niskanen Jyrki, Niskanen Mervi. Yritysrahoitus 2016. Edita Publishing Oy, Otavan kirjapaino Oy, Keuruu.
Kohi Antti, Liuskari Markku, Päivärinta Kimmo, Vihervä Vesa. Forum Uusi taloustieto 2012.  Otavan kirjapaino Oy, Keuruu.
 Outi Kokko, 1.10.2016 Talouselämä.  http://www.taloussanomat.fi/asuminen/2016/10/01/kaikki-irti-matalista-koroista-selvitimme-pitaisiko-nyt-ottaa-asuntolainaan-10-vuoden-korko/201610107/310  Luettu 1.10.2016.
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5 Responses to Mortgage: Love it, hate it, you will probably need it.

  1. jorinyholm says:

    Very interesting text. I have to keep eye on this situation !

  2. alisaem says:

    Great topic!

  3. pirrep says:

    Very topical issue for the young adults starting their careers.

  4. onnipe says:

    Nice and useful text!

  5. jonneryynanen says:

    Good blog post and important topic

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