Planning to draw down a mortgage. LTV in the 70s.
Figure I'll take my chances on the variable rate. Significant premium on the fixed rate at present.
I'm hoping the mortgage will be manageable enough for us to withstand a 2% rise in rates.
I work for a company that has hedged a lot of its debt over the last few years with fixed interest rate swaps and ended up way out of the money.
On the basis that the fixed rates are a function of expected future variable rates (standard interest rate swap valuation theory), I reckon there's generally a premium paid for hedging.
Advice sought. Particularly - can anyone de-mystify how the bank determines its fixed rate?
Figure I'll take my chances on the variable rate. Significant premium on the fixed rate at present.
I'm hoping the mortgage will be manageable enough for us to withstand a 2% rise in rates.
I work for a company that has hedged a lot of its debt over the last few years with fixed interest rate swaps and ended up way out of the money.
On the basis that the fixed rates are a function of expected future variable rates (standard interest rate swap valuation theory), I reckon there's generally a premium paid for hedging.
Advice sought. Particularly - can anyone de-mystify how the bank determines its fixed rate?