Fixed rate mortgage loans charge borrowers a fixed rate of interest for the loan throughout the period of repayment. Adjustable rate mortgage loans occur when the interest rate varies according to changes in the market.
Fixed rate mortgage loans prevail in various degrees in different parts of the world. In the United States, fixed rate loans are popular. In Canada, fixed rate loans are in a semi-fixed mode, with the fixed component confined to a limited period. In India, the fixed rate home loan is very popular. Mortgage loans are available for up to 30 years, as in the United States.
One of the most attractive features of the fixed rate mortgage loan is the relative safety it offers the borrower. The loan repayment would remain the same throughout the duration of the mortgage.
Unlike the adjustable rate mortgage loan, where the repayment is prone to interest rates fluctuating up or down, the fixed rate mortgage is free from any change in interest rate. Mortgage companies have pointed to the safe and steady aspect of the fixed rate mortgage with its “peace of mind” angle.
There have been mixed opinions whether the fixed rate mortgage is more popular than the adjustable rate mortgage, as the profitability, or the lack of it, varies in different situations. The fixed rate mortgage offers early redemption within stipulations and is subject to penalties, if applicable.
In the United States, the prevalent fixed rate mortgage rates range between 5.4% and 6%.
In India, the prevalent home loan rates range between 7.5% and 8%.
In the UK, when interest rates rise, even the fixed rate mortgages are affected. Mortgage durations in the UK range from 6 months to a full lifetime.
Some leading mortgage companies:
Fixed rate mortgages have undergone changes in various situations and have evolved over the years. Today, global companies are constantly improving their services with a customer oriented approach, as they optimize their offers to suit localized situations. As a result, a large number of products have flexible features that address the particular needs of the borrower, while assuring sufficient profitability to the lender.
Last Updated on : 24th August 2013