Spanish Fixed Rate Mortgages

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Thursday, 23 Oct 2008

With fixed-rate mortgages, the interest rate established in the loan agreement remains unchanged for the full life of the loan.

With these loans, both the lender and the customer are exposed to interest rate risk, that is:

• Should interest rates fall, the customer will not benefit from the reduction and may therefore end up paying a higher price than that which he or she would have to pay were he or she to arrange the loan at the current rate.
•  Should interest rates rise, the opposite is true, namely, the lender will bear the consequences, as it will not be able to pass on the cost to the customer.

Fixed Rate Mortgages In Spain

For both of these reasons, fixed-rate mortgages tend to have shorter terms than adjustable-rate mortgages, thereby reducing the risk of interest rate fluctuations to both parties.

What are the advantages of a fixed-rate mortgage?

The main advantage of a fixed-rate mortgage is that the exact amount of all the payments to be made over the full life of the loan is established from the very start of the transaction.

Find out about Spanish Variable Rate Mortgages.

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