The fixed interest rate is an element that you have to consider and compare before choosing to take any type of financing.
It is a key concept of financial education that allows you to know how much a credit will cost you depending on how long it takes to pay it, without considering other aspects such as commission for opening, that is the cost of the credit itself.
They depended on market conditions
Until before the 1994 crisis, most of the loans granted in Mexico were at a variable rate, that is, they depended on market conditions that the institutions raised or lowered the cost of loans.
However, fixed rate loans became increasingly common as the country’s macroeconomic fundamentals were consolidated. Hence we have had a very strong competition between some financial intermediaries one or two years ago by offering the lowest and fixed market rates, in products such as mortgage loans, for example.
Why is this fact so relevant?
Because it is the fixed cost that a credit will have for a certain period of time, regardless of the fluctuations of the national and even international economy.
And we can observe it particularly in these times. Regardless of global conditions such as conflicts in Greece’s pressure on markets; the financial problems of oil exporting countries; weakness in the Eurozone and Asia; and that the deflation in the Eurozone could be extended, today the cost of financing remains the same for people who hired their fixed-rate loans.
That is, when it becomes more difficult and expensive to access a credit for the conditions not only internal, but external, a loan that has been contracted at a fixed rate, will continue to cost you the same. That is why this issue is relevant in long-term loans, such as a mortgage.
Conditions we have cited and the possibility
From now on and precisely because of the conditions we have cited and the possibility that the Federal Reserve increases interest rates, the boom in loans with low fixed rates is about to conclude, not only in Mexico, but it is a phenomenon world level But if you previously contracted a loan at fixed rates, you will have nothing to worry about.
Hence the importance of observing the conditions in which you contract your credit and the rate, is one of them that is essential to verify.