What is the difference between a fixed rate and a variable rate?

A fixed rate mortgage is where the rate of interest you pay on your mortgage is kept the same (fixed) for a certain period of time, which is generally between 1-5 years. Once the fixed rate period has ended, in most cases you are then moved onto a reversion rate.

Variable rate mortgages are when the rate of interest you pay is linked to 1, 3, or 6 month EIBOR with a fixed percentage added by the bank. This means the rate you pay can go up or down over time, depending on EIBOR. For example, if in month 1 EIBOR is 2.5% and the fixed margin your bank applies is 1.49%, then the variable rate you will pay is 3.99%. If in month 6 EIBOR has increased to 3.5% then your variable rate will change to 4.99%.

You can read more about the difference between fixed rate and variable rate mortgages, as well as the advantages and disadvantages of each in our blog article here.


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