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What to do if interest rates rise?

Inflation and rising policy rates are putting pressure on mortgage interest. People wishing to take out a mortgage or need to renew a mortgage that is about to expire ask themselves the following question: how to protect themselves in the event of rising rates?

It is not so simple to answer this question. It all depends on the personal situation, living conditions, preferences and future prospects of the loan taker. In addition, each mortgage model has its advantages and disadvantages. Thus, fixed rate mortgages, with their interest rate and therefore their fixed financing costs, allow for more secure budgeting and planning. This hedge for the future, however, comes at a price.

In case of fear of a sudden rise in interest rates in the near future, it is possible, thanks to the fixed rate mortgage, to secure the current interest rate for a certain time and to protect yourself short-term rate fluctuations. On the other hand, if interest rates are expected to rise slowly and moderately, or not at all, money market mortgages – much cheaper at inception – are an attractive option. As an alternative, mixed strategies make it possible to limit both the costs and the risk of fluctuations in the rates applicable to various types of financing.

The following tips can help you choose the right mortgage for you:

Conclusion: There is actually no right, wrong or best strategy. The strategy depends on the personal need for security, the financial situation, the own future prospects and the interest in the constant monitoring of the evolution of the rates. It is therefore appropriate to seek professional advice from your Raiffeisen Bank in order to take all the important aspects into consideration and to develop the appropriate strategy together.

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