Economics, Econometrics and Finance
8 years ago

New study reveals when fixed or variable rate loans are better

The Engineering Economist
A Note on Equivalent Fixed Rate and Variable Rate Loans; Borrower's Perspective
David G. Carmichael, Lachlan B. Handford

Paper Summary

The article explores when fixed and variable rate loans are equivalent for borrowers. It provides a simple formula to determine which type of loan is better based on interest rate uncertainty and the rates offered. The main goal is to help borrowers make informed decisions when choosing between fixed and variable rate loans.

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