Fixed and variable rate mortgages are two of the most common types of home loans available to borrowers. Understanding the key differences between these two options is crucial in making an informed decision when purchasing a property.

A fixed rate mortgage, as the name suggests, has an interest rate that remains constant throughout the term of the loan. This means that the borrower’s monthly repayments will be the same every month, making it easier to budget and plan finances. Fixed rate mortgages are often preferred by those who value stability and predictability, as they provide protection against potential interest rate increases. Additionally, fixed rate mortgages tend to offer more security, as the borrower is sheltered from market fluctuations that could impact their mortgage repayments.

On the other hand, a variable rate mortgage has an interest rate that can fluctuate over time, often in response to changes in the lender’s cost of funds or market conditions. This means that the borrower’s monthly repayments may increase or decrease, depending on the prevailing interest rate environment. Variable rate mortgages are often preferred by those who are comfortable with taking on some level of risk, as they may offer lower interest rates than fixed rate mortgages, at least initially. However, variable rate mortgages can be more unpredictable, and borrowers may be exposed to higher interest rates if market conditions change.