{"id":1710,"date":"2016-08-10T19:50:55","date_gmt":"2016-08-10T17:50:55","guid":{"rendered":"https:\/\/www.lsolutions.ch\/en\/?p=1710"},"modified":"2016-08-10T19:50:55","modified_gmt":"2016-08-10T17:50:55","slug":"has-the-fixed-rate-mortgage-served-its-time","status":"publish","type":"post","link":"https:\/\/www.lsolutions.ch\/en\/has-the-fixed-rate-mortgage-served-its-time\/","title":{"rendered":"Has the fixed-rate mortgage served its time?"},"content":{"rendered":"
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Many people believe a low-cost Libor mortgage is the right choice of home financing at present. Why they could be wrong.<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/header>\n
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Successful home financing has to be affordable over the long term.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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When the central banks rapidly lowered interest rates in response to the financial crisis, economists forecast that they could soon start rising again. But the opposite happened. The European economy now relies on \u201ccheap money\u201d, i.e. low interest rates. That\u2019s why mortgage rates have also remained at a very low level in the past few years relative to the long-term average. And hardly anyone is now willing to predict when the interest situation could return to normal.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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What is the \u201cright\u201d time?<\/span><\/h3>\n
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So, is it worth switching fully to a low-cost, variable-rate Libor mortgage? Alfred Ledermann, Head of Mortgage Product Management, draws our attention to aspects that often get forgotten: \u201cIt\u2019s true that there are no signs of a sudden interest hike at present. But when rates do eventually rise, the interest on fixed-rate mortgages will go up sooner than that on Libor mortgages.\u201d<\/p>\n

That\u2019s why it can be very difficult to identify the right time window for switching from a Libor to a fixed-rate mortgage. And the financial markets never fail to throw up surprises. Viewed historically, interest rates have always returned to their average level so far. Ledermann: \u201cWhen it comes to home financing, it\u2019s never advisable to only consider a fair weather scenario.\u201d<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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The right mortgage mix<\/span><\/h3>\n
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The interest rates on fixed-rate mortgages remain highly attractive. This means it is possible to insure yourself against an interest hike at a reasonable cost. It can therefore make sense to choose a combination of Libor and fixed-rate mortgages. \u201cA Libor mortgage lets you benefit from the record-low interest rates. At the same time, also having a fixed-rate mortgage in the mix affords you partial protection from a sudden rate rise,\u201d advises Ledermann.<\/p>\n

Ultimately, which mortgage mix is right for you depends on what kind of person you are rather than how much money you have in your wallet. How are interest rates expected to develop? How do you handle risk? You should only rely fully on a Libor mortgage if you are actually prepared to dig a lot deeper into your pockets when interest rates do eventually rise.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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Questions you should ask yourself<\/span><\/h3>\n
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Experience has shown it can be helpful to discuss the financing combination with an expert. However, only you can answer the key questions.<\/p>\n