Are you thinking of buying a house and need bank support? Decide which interest rates best suit you.
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Author: Redaction
In addition to choosing the house of your dreams,
the decision on which interest rate to choose is one of the most important when taking out a mortgage,
as it is something that will accompany you until the loan is paid off.
Rates change according to the market and its financial indicators, so
to help you understand the differences in the rates available, SUPERCASA Notícias will answer your questions. We
are currently living in times when inflation in the Eurozone is out of
control, and the major impact is on citizens, increasing the cost of
living in general. With this in mind,
the ECB (European Central Bank)
has been studying the possibility of reducing interest rates, which are
closely related to inflation, thus causing
gradual relief and greater financial leeway for families.
These changes fluctuate with the
Euribor, which in turn is calculated daily and
defines the average interest rate on interbank loans.
The fixed interest rate
If you opt for a fixed interest rate,
you will always pay the same amount to the bank regardless of Euribor fluctuations. However,
you should bear in mind that you may end up with a higher amount
compared to the variable rate, due to the security of not having
increased instalments.
The rate to be applied depends on the bank, but is based on market values for the same term - this is called the swap rate.
The advantages are therefore
predictability and security, allowing for
more precise financial planning since the monthly instalments will always be the same, and
protecting you against unexpected interest rate rises, which can be crucial for families with tighter budgets.
The cons, on the other hand, are cost, as the fixed interest rate is generally higher than the variable one due to the risk taken on by the bank, and
inflexibility, as it prevents you from benefiting from potential drops in interest rates during the contract period.
The mixed interest rate
This is the rate that has been most sought after, as it has
fixed interest at the start of the contract, followed by a variable rate. Those looking for greater stability prefer this rate as it is
not subject to variations. It thus combines the characteristics of fixed and variable rates, dividing the contract period into two phases:
in the first, the rate is fixed for a set period - for example, 5 or 10
years - while in the second phase the rate becomes variable, indexed to
Euribor.
This type of rate thus offers
balance and savings potential,
as you will have greater flexibility and benefits in relation to
falling interest rates during the variable phase, but also in the first
few years, during the fixed phase, when the impact of instalments on the
budget is more critical.
On the other hand, the mixed interest rate type gives less predictability, increasing the feeling of uncertainty,
as the monthly instalment could go up after the fixed rate period if
interest rates rise, making it difficult for you to plan your finances
in the long term.
The variable interest rate
If you opt for the variable interest rate, you need to bear in mind that it depends on two factors: the spread and the 3 or 6 month Euribor rate. So if you opt for this version, you can expect to pay more if the Euribor rate rises. On the other hand, if it goes down, you'll pay less.
So the advantages lie in the cost and savings potential, while the disadvantages are intrinsically linked to the risk and unpredictability of interest rates, which can go up as well as down.
Which is the best choice?
It's important to bear in mind that each
situation is unique and specific and should always be monitored by a
financial institution, which will present you with the best conditions
and options for your financial availability and profile.
Nevertheless:
- If you value security and predictability, a fixed rate may be the best option, even if it implies a slightly higher cost;
- If you're looking for a balance between security and flexibility, a mixed rate may be a good alternative;
- If you have a higher risk profile and are willing to take a risk in
exchange for a potentially lower cost, the variable rate can be
advantageous, as long as you are prepared to deal with the possibility
of increased instalments.
Remember that the choice of interest rate is a crucial decision with significant potential for your long-term finances.
Investing time in analysing the different options and consulting a
credit broker is key to making the right decision for you and your
future. The criteria
you should take into account before choosing are: - The stability of your income;
- The term and amount of the bank loan;
- The potential for career progression.
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