When applying for a mortgage, one of the most important choices concerns the type of rate. Choosing a fixed rate or a variable rate can significantly affect the monthly payment and the total cost of the loan.
In this guide you will discover the differences, the advantages, and how to choose the solution best suited to your needs.
What is the fixed rate
The fixed rate keeps the installment unchanged for the entire duration of the mortgage.
It is calculated based on the IRS (Interest Rate Swap) at the time of signing and remains the same for all the years of the loan.
Advantages of the fixed rate
✔ Stable and predictable installment over time
✔ Maximum security for those who prefer to avoid surprises
✔ Ideal for long-term mortgages (20–30 years)
Disadvantages
✘ Generally the initial rate is higher than the variable one
✘ Less convenient if market rates go down
What is the variable rate
The variable rate changes over time based on the trend of the Euribor.
The installment can therefore increase or decrease depending on economic conditions.
Advantages of the variable rate
✔ Lower initial rate compared to the fixed
✔ Possibility to save if rates remain low
Disadvantages
✘ Unpredictable installment
✘ Greater risk for those with unstable incomes
✘ Can become expensive if rates rise significantly
Hybrid solutions: mixed and variable with CAP
Many banks offer intermediate alternatives:
Mixed rate: you can change the rate (from fixed to variable or vice versa) at predetermined intervals.
Variable rate with CAP: protects you with a maximum cap beyond which the installment cannot rise.
Which rate to choose?
The choice depends on:
your job stability
mortgage time horizon
risk appetite
economic context of rates
In summary:
If you want security → Fixed rate
If you are looking for initial savings and can handle possible increases → Variable rate
If you want flexibility → Mixed rate or variable with CAP
Conclusion
There is no absolutely best rate: there is the rate most suited to your situation. Always evaluate several quotes and compare the APR, which indicates the real cost of the mortgage.
