QUESTION: Fixed or floating rate?

The choice between a fixed and floating interest rate on a mortgage loan is a key decision that directly determines your financial stability for many years to come. A fixed rate guarantees that the monthly payment amount will remain completely unchanged throughout the entire loan term, which provides a high level of predictability and peace of mind for the family budget, although such offers may initially have a slightly higher interest rate.

A floating rate, on the other hand, is tied to the Central Bank's key rate or another market indicator, so it can both decrease during periods of economic growth and cheaper money, and sharply increase in crisis moments, increasing your debt load. Due to such volatility, floating rates carry increased risks for borrowers who do not have large savings in case of a sharp jump in mandatory payments.

During periods of economic instability and high key rates, experts unanimously recommend choosing exclusively a fixed rate to protect yourself from the loan becoming more expensive. If market rates drop significantly in the future, you can always use the refinancing procedure and re-issue the mortgage at a more favorable rate in the same or another bank.

During periods when general market rates are at historically low levels, it is also advisable to lock in favorable terms for the entire term, since forecasting long-term macroeconomic trends is extremely difficult. Trying to save momentarily using a floating rate in the long run often turns into much greater financial losses and risks of losing the mortgaged property.