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A fixed rate loan or mortgage, as the
name suggests, is a loan where the rate of interest
is fixed for at least part of the loan period but not
necessarily the entire loan period.
The advantage of this form of borrowing is that it means
the borrower and the lender will have a more accurate
idea of how much will be paid back by the borrower in
the final analysis. Furthermore, as the interest rate
is fixed, it will not be affected by fluctuations in
interest rates.
Thus, you will not benefit from reduced interest payments
that would accompany a drop in interest rates but you
also wouldn't be required to pay more in the event of
interest rates going up.
When the likelihood is that interest rates are set to
rise and remain at a high or higher level for some time
then fixed rate loans are likely to increase in popularity. |
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