Mortgage rates: A comparison of mortgage models and interest rates is worthwhile

A comparison of mortgage models to determine the most attractive mortgage interest rates

What your optimal mortgage strategy looks like will depend on several factors: What kind of interest costs would you be comfortable with? Are present interest levels, and thus current mortgage interest rates, high or low? And what general trends are predicted for market interest rates? A financial climate with rising interest rates demands a different strategy from that which would be deployed in a market where rates are falling. Whilst many providers’ mortgage contracts differ in terms of detail, there are really only three mortgage models, each with their own particular advantages:

• Fixed-rate mortgage: This usually covers a mortgage term of five to ten years. Its most attractive feature is that the mortgage interest rate is fixed, which makes budgeting and financial planning easier compared to the other two models. From the outset, you will know how much your monthly expenses will be over the entire mortgage period, and since you won’t have to worry about interest rate fluctuations, there will be no costs incurred if interest rates should rise. However, you will gain no benefit from falling interest rates.
• Variable-rate mortgage: Unlike a fixed mortgage contract, a variable rate mortgage does not charge a fixed rate of interest. Instead, the rate is subject to the market climate and corresponding interest rate changes determined by your mortgage lender. Market fluctuations can be quite positive, so if interest rates fall a variable rate mortgage will be an advantage, though you must also accept that interest rates may rise. However, the fact that there is no fixed term means you can give notice to terminate a variable mortgage contract and switch to a more favourable mortgage at any time.
• LIBOR mortgage: A mortgage model linked to the LIBOR bank rate (LIBOR is an abbreviation of the London Interbank Offered Rate). This represents the short-term lending rate available to major banks on the money market. With this contract the mortgage interest rate is adjusted every three to six months to reflect the market environment. In times of falling interest rates this mortgage model does well. And if mortgage rates rise, the LIBOR mortgage offers a special feature which distinguishes this contract from a variable rate mortgage: On payment of a fee, the mortgage holder can set an agreed interest ceiling – also known as a cap.

Find the best mortgage rates with a MoneyPark

Which bank or insurance lender offers the best mortgage rate? Comparing the market is a complex process for the mortgage holder who must obtain a personal quote from every bank and insurance lender (not to mention pension funds). In addition, many providers have their own individual product ranges which can be difficult to compare within the market. Such special models may include new-mortgage discounts, preferential terms for sustainable and eco-friendly construction features, or more favourable rates for households with children. And when these concessions are combined, the situation becomes even more confusing. MoneyPark can offer you an informed perspective on market conditions. We can find you the best possible mortgage interest rate by comparing more than 100 banks, insurance companies and pension funds.