Variable interest rates are often attractive due to their lower initial cost. But what’s the real risk? Here’s everything you should know to make an informed decision.
What is a variable interest rate?
A variable interest rate is tied to a financial index (like the Euribor), plus a fixed bank margin. It is reviewed every 3, 6 or 12 months. Your monthly payment may go up or down depending on market conditions.
Main benefits of variable rates
- Lower initial rate than fixed-rate loans.
- Opportunity to save if market rates decrease.
- More flexibility for early repayment, often with fewer penalties.
Key risks to be aware of
- Higher monthly payments if rates rise.
- Lack of predictability over the long term.
- No guaranteed ceiling unless capped by the bank.
Who should consider a variable rate?
Variable rate loans may be a good fit for:
- Borrowers with a stable financial situation.
- Clients who plan to resell or repay early.
- Experienced buyers who understand rate fluctuations.
Conclusion
Variable rate mortgages offer real opportunities—but not without risk. With a broker’s help and a long-term strategy, you can make the right decision for your situation.
