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In contrast, those with a higher risk tolerance and optimism about declining rates might prefer to ride out the floating rate. Currently, floating rates sit at about 4.1%, and on the same loan, this would amount to about $2,500 monthly. If interest rates fall in the coming months, the borrower stands to benefit from reduced repayments.
Market Predictions and the Premiums for Fixed Rates
Interestingly, fixed rates are often higher than floating rates to compensate for stability, but when fixed rates are lower than floating ones, it signals market expectations of declining interest rates. In such scenarios, opting for the floating rate can be advantageous, provided the borrower is comfortable with potential rate fluctuations.