What's the Lowest Mortgage interest RateWhat is the lowest mortgage rate?
Prize surpasses safety in Finland
The European Central Bank (ECB) data show that the median interest rate on home loans in Finland in February was around 0.92 per cent, the lowest in the EU. Heidi Schauman, head treasurer of the Finish Aktia banks, says they are so low in Finland because they are tied to floating interest rate markets.
"It' it' it' it' it' it' it' it' interest rate. Long dated interest rate fixes are more prevalent in the remainder of the euro zone and borrower pays a bonus for them," Schauman said. However, while most mortgage holders in Europe may want to make more payments, they know that interest levels will not go up as in Portugal and Finland.
"In Finland it seems that we favour lower pricing over (a feeling of) safety, and we bear the brunt of exchange-risk. Very often they want to do things like everyone else, so there are different ways of doing things in different parts of Europe," Schauman said. When the economy is doing well, the policy of repaying a mortgage with varying interest levels is good.
There are more opportunities for Finnish borrowers to take advantage of the currently very low interest rate than most of their colleagues in the euro area. Schauman pointed out, however, that it will be more challenging for Finnish creditors than for other Europeans if interest levels increase. "Most home loan schemes in Finland are mostly 12-month Euribor, which is updated every 12-month.
If these interest rises, Finish home buyers will see the upturn. The increasing cost depends on the type of credit taken out," she said, and added that in Germany 20 years of mortgage payments are often made at constant, unaltered interest rate over the life of the credit. However, the economic expert noted that at the end of the daily period, the ultimate cost of a variable-rate mortgage is often lower than that of a fixed-rate mortgage.
In February, the highest mortgage interest in the euro zone was in Ireland and Greece (just above or below three per cent), while Estonia, Belgium and Spain had interest levels of around two per cent. Observers may be amazed to find out that interest rate levels for home loan projects across Europe are so different despite their municipal involvement in the euro area.
If interest rate changes, there will be big changes in the actual economies (employment rate, magnitude of GNP and volume of investment) and in the situation of simple people," Schauman said. "This means that changes can be seen even with rising interest levels. However, this is the point, and how Finland was able to quickly adapt domestic spending - by adjusting interest rates," she said.
Interest charges on dwellings in Finland are likely to stay low for some considerable period of the year, according to Schauman, but in the long run the banking sector does not intend to make a loss. Aktia said in its latest forecast that it expects interest rate hikes for the first consecutive year. "At any rate, it is clear that, subject to any surprise, the Federal Reserve will start to increase interest levels.
In the coming years we will have very low interest levels and it will help Finland's borrowers," she said.