The profitability of fixed vs variable interest rates on Lithuanian housing loans over the last decade

Loans with fixed interest rates are almost non-existent on the Lithuanian market, and the Bank of Lithuania (LB) wanted to change that – it prepared amendments to the laws, according to which banks would be obliged to provide two interest alternatives for housing loans. However, the offer of fixed interest rates might not always be more enticing. 15min made calculations, which loan – with a fixed or variable interest rate – was more profitable in the last 10 years.

If a loan is taken out with a variable interest rate, the monthly payment is recalculated once a year, once every six months or once every three months.

And then there are residents who have loans with a fixed interest rate – those who have been paying the same amount per month for several years. True, they are not easy to find.

As Gedimins Šimkus, chairman of the board of LB, tells the news media “15min”, only 3% of housing loans in Lithuania have fixed rates. At the same time, according to him, the proportion of such loans in the euro zone countries is on average around 80%.

“Currently, we have prepared specific legislative proposals, which we have submitted to the Ministry of Finance. In our opinion, credit institutions should provide consumers with two offers: with a variable and a reasonable fixed interest rate,” informs Šimkus.

According to him, once the changes are adopted, people would have a choice. Now such a possibility is more only on a theoretical level.

“Theoretically, there is a fixed interest rate instrument, and some customers use it, but in my opinion, it exists only theoretically. To change this situation, this offer must be put on the table as equivalent to the variable interest rate,” says Šimkus.

But could a fixed rate offer be better than variable rates? The 15min portal compared which loan was more profitable in the last almost 10-year period, as well as outlines future scenarios.

2024-02-05 22:17:00
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