Saturday, 26 July 2014

Interest rates and mortgages

Usually we think of it only as a permanent component of our interest rate mortgages. What are the interest rates? How determined is their height? How to influence the level of monthly installments of our loans?

Interest rates

WIBOR - Warsaw Interbank Offered Rate, is the interest rate at which banks lend cash to each other, that is, interest on loans for the so-called Polish. the interbank market. The index value is determined on each business day by calculating the arithmetic average bids submitted by banks participating in the swap. Due to the fact that WIBOR set is so often the case with long-term loans are used WIBOR 1M, 3M and 6M, ie the interest rate applicable for a period of one, three and six months.

The same principle is fixed interest rate of LIBOR (London Interbank Offered Rate) is determined for the London market for pounds, dollars, Swiss francs and euros. For the latter currency is calculated as EURIBOR (Euro Interbank Offered Rate), which is the interest rate applicable in the case of loans in the euro area.

... And their relationship with our credit

All of the above indicators - interest rates - have the same impact on our mortgage - regardless of whether they are provided in U.S. Dollars, or Euros, or francs. Indeed they are a regular part of your mortgage interest, which consists of just the interest rate and the bank's margin.

Why is the interest rate component of the interest rate? On the one hand this is because the bank lending with a given sum must, at a certain price, borrow it from another bank. On the other hand, the bank having this amount could this just borrow a percentage of it to another bank. Taking into account the interbank interest rate is therefore to cover the cost of bank lending, or offsetting the lost benefits that could be obtained.

It is worth noting also that interest rates when mortgages are determined, as mentioned, for longer periods of 1M, 3M and 6M. Hence, in contrast to the unchanging standard of the bank's margin, the difference in their values ​​may be affected by the increase or decrease in our loan installments - the word on the overall cost of the loan. He will, of course, the smaller, the lower the level of the applicable interest rate, so it's good news for borrowers is every time reduction WIBOR, LIBOR, or EURIBOR.

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