Is it good to switch to fixed rate home loan when interest rates are moving up?
- In a floating rate loan, the borrower bears the risk if rates move up and gets rewarded when they decline. In a fixed rate loan the lender bears the risk. To compensate for this risk, lenders charge 75-100 basis points higher interest on fixed rate loans
I took a floating rate home loan three years ago. The prevailing rate of interest is 6.75%, but I am told this could soon go up as interest rates are moving up. Should I switch to a fixed rate home loan now? That way I can avoid the hike in rates.
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