How is a floating interest rate different from a fixed rate? What is a "floating" and "fixed" mortgage interest rate? What is a fixed rate loan.
In today's world, there are a variety of mortgage programs on the market that have their own floating and fixed interest rate. They have a number of parameters: term, loan amount, interest rate, conditions for early repayment, down payment amount, commission amount, and so on.
floating interest rate- represents the % accrual system, it is tied to a market indicator.
Fixed interest rate- represents the % accrual system, in which loan payments are calculated based on the percentage of use of the loan amount.
A fixed interest rate differs significantly from a floating interest rate in that they have different categories, and also have their own advantages and disadvantages.
For issuing loans in Russia, two indices are used: MosPrime used for ruble lending, LIBOR- for currency. The floating interest rate is divided into several parts: the interest rate and the floating index, which makes the final interest rate floating. If the index goes up, the total interest will increase accordingly, the borrower will pay more. If the index falls, the borrower saves accordingly.
What is LIBOR?
LIBOR is a world-famous indicator of financial income. At this rate, many banks lend to other major banking institutions on the London Interbank Stock Exchange. This rate is very common all over the world. It is formed on the interest rates of world banks.
What is MosPrime?
MosPrime is the indicator interest rate for ruble loans on the Moscow banking market. It is formed by the national currency. The rates announced by the banks are indicative information and should fully reflect the level of interest rates.
How exactly does the floating interest rate change?
The LIBOR rate is fixed for periods ranging from a couple of days to twelve months. Mortgage lending often uses LIBOR 6M. As a rule, with floating rate lending, the interest change occurs twice a year. There are different options, every three or twelve months the index can be revised. Frequent rate changes are not convenient for loan recipients.
How does the fixed interest rate change?
This rate provides for changes by agreement of both parties and in accordance with the conditions specified in the loan agreement. The legislation does not provide for other grounds for change. Therefore, unless otherwise provided by the agreement, the rate may change upon signing an additional document that will change the terms of the loan contract.
Disadvantages and advantages
"Floating"% rate- the opportunity to receive a loan at a lower rate compared to the price situation in the market as a whole. However, at such a rate, there is an interest rate risk, which, in the end, may lead to an increase in the % rate.
"Fixed rate- allow the borrower to pay their expenses, which will always be a certain amount.
In the process of choosing a loan, floating and fixed interest rates have their own advantages and disadvantages, and it is up to you to decide what is the best option for you.
Many people, when applying for a mortgage loan, are at a loss when the bank manager is interested in what interest rate the borrower wants to take out a loan - fixed or variable. Of course, without knowing the difference between floating interest rates and fixed rates, it is difficult to immediately answer the question of a bank employee, and since people seek stability, they most often choose fixed interest rates. Consider the difference between the existing schemes for calculating the amount of interest on a loan.
Floating interest rate and its features
The floating annual rate differs from the fixed interest established at the conclusion of the agreement in that its value is not constant, it depends on a specific bank indicator. This rate consists of two parts - the main part, which does not change, and the floating index, which directly affects the change in interest. Many bank clients, when applying for a mortgage, do not want to set a variable rate precisely because of this index, as they are afraid of its sharp increase. In turn, lenders, in order not to lose their customers, make concessions to borrowers and set a certain limit on the interest rate, which cannot be exceeded, even if the index increases and the calculated amount of interest on the loan is higher than the established maximum.floating rate index
The floating interest rate index itself is formed by banks based on the LIBOR or MosPrime indicator. LIBOR is the amount of interest used when lending by one banking organization to another bank. This value is formed taking into account the level of these interest in the largest banks in the world. It is calculated for seven currencies and for a period from several days to a year. Basically, Russian creditors in their calculations use the level of this indicator, calculated for six months. In a loan agreement, banks often indicate the amount of floating interest equal to, for example, 3+ LIBOR.This is if the bank takes as a basis world indicators for the formation of its interest rates. However, another option is also possible, when the creditor takes as a basis a similar indicator for the Russian Federation - MosPrime, which appeared in 2005. MosPrime is calculated on the basis of similar interest rates for the eight largest financial and credit institutions of the Russian Federation. This indicator is calculated for weeks and months. For example, for one week, two weeks, for one or two months, for a quarter or for half a year.
Advantages and disadvantages
A fixed interest rate allows borrowers to apply for a loan, which will definitely not rise in price throughout the entire period of borrowing. However, a floating interest rate allows bank customers to borrow money at an initially lower interest rate than at a fixed rate. As a last resort, if the floating rate index rises, the borrower can always refinance the mortgage loan and get another fixed rate loan from another lender.When concluding a loan agreement, you must carefully read all the clauses that are written in it. The main problem is that after reading the entire contract, an ordinary citizen does not always understand what can change on his loan, respectively, it can be very different from the one that the manager initially told him about. And all because the loan was taken at the so-called floating interest rate. What is it and are there other types of bets?
In fact, when taking a consumer loan, such questions usually do not arise - we are talking about a fixed rate. What does it mean? This means that a fixed interest rate is set at the time of signing the loan agreement and is valid throughout the entire loan period. That is, this is the rate that the manager initially told you about. At the same time, it doesn’t matter how many years you take a loan, be it at least the minimum, at least the maximum period - nothing will change and this has its advantages. For example, when the Central Bank raises the key rate, which was done at the end of 2014, the amount of your payments will not change.
As for the floating interest rate, it can change depending on several reasons. It usually depends on the situation in the interbank lending market and is calculated based on one of its indicators. There are two main indicators in our market - LIBOR and MosPrime. The first is used for loans in dollars, and the second - in rubles. The fluctuations to which the main indicators are subject are physically impossible to calculate in the long term, since the situation on the market can change dramatically in one day. Therefore, the borrower assumes all the risks.
However, many banks offer to use a special insurance mechanism. It allows you to set a kind of framework for the fluctuating indicator of the market lending rate. In this case, if the indicator goes beyond the limits, it is considered invalid and the indicator is fixed at the highest or lowest level. This, by the way, is beneficial not only to the borrower, but also to the bank.
By the way, I would like to note that the floating interest rate is most often used in, in the consumer loan market it is used much less frequently. However, everything can change. As it was written above, the Central Bank raised the key rate to 17% from 10.5%, as a result of which the banks were forced to raise the interest rate. Therefore, when taking a loan now there is a considerable probability that the interest rate will be exactly floating.
What to choose?
In the current and very unstable situation, which changed a lot in 2014, of course, it is better to give preference to a fixed rate, so as not to depend on various values. And do not be embarrassed by the fact that in the case of a floating interest rate, loan payments will be somewhat lower, since in the future, most likely, a loan with a fixed rate will be much more profitable. Another thing is that banks have significantly raised lending rates, which will certainly affect the reduction in the number of loans taken ... However, this is a topic for another conversation.
Action to reduce loan rates at Sberbank in 2019
Sberbank extended the Unsecured Consumer Loan campaign by lowering the minimum rate for a number of loan amount ranges. The promotion applies to loans from 300,000 rubles and is valid for all categories of customers.
The maximum reduction compared to the baseline was 1%. The new minimum rate for the promotion is 11.9% (previously - 12.9%). Interest rates on loans up to 300 thousand rubles remained in the same range - from 13.9 to 19.9%.
You can apply for a consumer loan with a reduced interest rate without collateral at a bank branch, in the web version of the Internet bank and in the Sberbank Online mobile application until July 1, 2019.
In addition, the bank returned the possibility of obtaining loans with guarantors. They are available to young people from 18 years old and pensioners up to 80 years old. They are also subject to a rate reduction promotion valid until July 1.
However, similar conditions are offered by other banks and customers can apply to other credit organizations.
Correspondents of the Business Information Agency TOP-RF.ru counted at least a dozen banks that issue consumer loans at a low interest rate, and with a high probability of approval of the application. You can see their list with basic lending conditions and the possibility of submitting an online application.
But if you are determined to apply specifically to the Security Council of the Russian Federation, then TOP-RF.ru correspondents will talk about the current lending conditions, and also explain how to get a low interest rate on a loan from Sberbank under today's circumstances.
Lending conditions at Sberbank today
The promotion to reduce rates in Sberbank is valid until July 1 and applies to unsecured and guaranteed loans. Let's start with the first one.
1.Action on a Sberbank loan without collateral
The general conditions for unsecured loans today are as follows:
Interest rates on loans in Sberbank without guarantors
Sberbank loan interest rates for individuals without collateral today depend on the amount and term. In addition, some preferences have payroll clients and pensioners who receive payments to the card of the Security Council of the Russian Federation.
Basic conditions
2.Action on a loan in Sberbank with a guarantor
We note right away that the peculiarity of this consumer loan is that it can be obtained by young people aged 18 to 21 years old and pensioners from 60 to 80 years old (at the time of full settlement with the bank). And the guarantor must be over 21 years old and under 70 years old. The general conditions for loans with a guarantor today are as follows:
Interest rates on loans in Sberbank with a guarantor
Sberbank loan interest rates for individuals under surety today also depend on the amount and term. In addition, some benefits are available to payroll clients and pensioners who receive payments to the card of the Security Council of the Russian Federation.
Special conditions if you receive a salary or pension to an account with Sberbank
Basic conditions
Compare:
Loans at favorable interest in Post Bank >>
Interest on loans for individuals in Alfa-Bank >>
How to get a low interest on a loan at Sberbank today
As you can see, not everyone can get the minimum rate on a Sberbank loan of 11.9% per annum now. But only those who:
1. receives a salary or pension on a Sberbank card.
2. will issue a consumer loan in the amount of 1 million rubles.
3. will issue a consumer loan in the amount of 300,000 to 1 million rubles. But in this case, as we can see, the rate ranges from 11.9% to 16.9%. The chance of getting the minimum 11.9% is not great. The rate is determined for each client individually. And its size depends on a variety of criteria: the borrower's credit history, his income, place of work, etc.
BY THE WAY!
If you cannot get the minimum loan rate without collateral, then pay attention to another Sberbank loan program: Non-purpose loan secured by real estate. The percentage there may be lower.
Calculation of a Sberbank loan at a low interest rate
Now let's calculate how much money the bank will have to pay monthly if you take a loan at today's minimum base rate of 12.9% per annum. Suppose you have approved 1 million rubles. The amount of the monthly payment will depend on the term of the loan and will be as follows.
Term |
Monthly payment |
RUB 89,270 |
|
RUB 26,778 |
|
RUB 22,702 |
The amounts, as we see, are not small. Therefore, before taking out a loan for a large amount, weigh the pros and cons a hundred times. Try to realistically assess your financial capabilities. And if you have even the slightest doubt that you can repay the loan on time, then it’s better not to take it!
Learn more about consumer loans at Sovcombank →
Credit online calculator of Sberbank of Russia - 2019
How to get a Sberbank loan at a low interest rate
The methods of registration today depend on what kind of loan you take - with or without a guarantor. Consumer loan without collateral can be done in several ways:
In the office. To do this, you need to contact the branch of Sberbank at the place of registration. Only salaried clients are eligible. Individuals who receive a salary / pension to an account with Sberbank are provided with loans at a bank division, regardless of their place of registration in the territory of the Russian Federation.
And here loan secured by individuals can only be issued at a branch of Sberbank.
The term for consideration of a loan application can be from several hours to several days, depending on the category of the client.
Those who receive a salary to an account with Sberbank will receive an answer within 2 hours from the day the full package of documents is submitted to the bank. In other cases, the term for consideration of a loan application may be 2 business days.
If your application is approved, then you will receive the money at a time in a non-cash form. They will be transferred to your debit card account.
Who can take Sberbank loans
To receive a consumer loan at Sberbank without guarantors Individuals who meet the bank's requirements for borrowers can apply. They are the following:
1. Age at the time of the loan:
- - at least 18 years old if you receive a salary or pension to an account with Sberbank
- - at least 21 years old - for other borrowers
2. Age at the time of loan repayment under the agreement:
- - no more than 70 years
3. Work experience:
- - at least 3 months at the current place of work - for clients receiving a salary or pension to an account with Sberbank. For working pensioners receiving a pension to an account with Sberbank, the total length of service for the last 5 years must be at least 6 months.
- - at least 6 months at the current place of work with a total work experience of at least 1 year over the past 5 years - for clients who do not receive salaries to an account with Sberbank.
consumer loan under surety individuals can be obtained by young people aged 18 to 21 years and pensioners from 60 to 80 years (as of the loan repayment date). And the guarantor must be over 21 years old and under 70 years old. The seniority requirements for this loan program are the same.
Documents for a loan from Sberbank
Before applying to the bank for money, both the borrower and the guarantor (if any) need to collect a whole package of certificates and documents. Proof of identity, financial solvency and employment is required. For most clients, the list of documents may be as follows:
- 1. Passport of the Russian Federation with a registration mark;
- 2. A copy of the work book;
- 3. Certificate 2-NDFL for the last 6 months or a certificate in the form of a bank.
If for some reason you cannot provide these particular documents, for example, you have a work book or 2-NDFL certificate, then they can be replaced by others. We have a whole article devoted to documents for obtaining a Sberbank loan for individuals. You can familiarize yourself with it.
It should be noted that when confirming the financial solvency, the bank can take into account income not only from the main place of work. Money received from part-time work, as well as pensions and a number of other payments, are also suitable.
Interest on loans changes not only Sberbank
In 2019, not only Sberbank updated interest rates on loans - this is a general trend in the market. Raise interest rates on loans and other banks.
Recall that the lowest interest on the loan, as a rule, can be received by the bank's salary customers, as well as those who provide any property as collateral.
Contacts for information and consultations
Learn more about interest rates and terms of consumer loans as part of the Sberbank loan campaign on the official website www.sberbank.ru or at the Bank's branches.
In Russia, discussing the issue of resuscitation of mortgages with a floating rate
Russia is discussing the issue of resuscitation of mortgages with a floating rate. At the end of last year, the leadership of the Agency for Housing Mortgage Lending (AHML). At the end of October, First Deputy Prime Minister of the Russian Federation Igor Shuvalov instructed the Ministry of Finance and the Ministry of Construction, together with the Central Bank of the Russian Federation, AHML and a number of leading Russian banks, to prepare proposals for state subsidies for mortgages with a floating rate linked to the key rate of the Central Bank or inflation.
The Ministry of Construction is considering the possibility of introducing a floating interest rate on mortgages from 2016 to maintain the volume of loans. However, already in November, the Deputy Minister of Finance of the Russian Federation, Alexei Moiseev, said that "the floating rate of mortgages with state support, if introduced, should not be tied to inflation." “If it is tied to inflation, it is devastating for all participants in the process, including banks,” Moiseev stressed.
What is a variable rate
Floating/variable interest rate is the rate on loans, the amount of which is not fixed, but is calculated according to a formula determined by the agreement. As a rule, it is tied to rates on the interbank market, such as MosPrime, the indicative rate for granting ruble loans on the Moscow money market.
To this rate, the bank adds another fixed percentage. Depending on the terms of the contract, the rate can be reviewed both daily and at other agreed timeframes, such as monthly. The time intervals through which the bank reviews the floating rate are called interest periods.
Meanwhile, the variable rate for the mortgage lending market in Russia is not an innovation - it has been included in some banking products before. “It was and is being used by many banks, although in 2014-2015 it is already much less common,” recalls Irina Pavlova, head of the internal control service at DeltaCredit Bank. DeltaCredit previously had products with a floating rate, but they were not in great demand and were closed. “They were not in high demand, since they were available only for loans in foreign currency and were initially one of the riskiest types of lending,” says Christina Shulgina, head of the mortgage and loans department at NDV-Real Estate.
Experts believe that floating-rate offers are unlikely to significantly compete with standard offers on the market. “The fact is that a borrower who has chosen a fixed-rate loan program knows how much he must pay the bank every month. This means that you can clearly plan your mortgage expenses, which is especially important during periods of economic instability,” explains Kristina Shulgina.
Benefit in a mortgage loan does not depend on the type of lending: fixed rate or floating. “The benefit no longer depends on the type, but on the size of the interest rate. But in general, a fixed rate gives a clear understanding of the amount of the monthly payment for the entire term of the loan. With a floating rate, it is almost impossible to predict the dynamics of the index to which it is linked. This complicates the assessment of the client's solvency for the bank and budget planning for the clients themselves,” Irina Pavlova believes.
According to experts, a person who has taken a mortgage may face unpredictable expenses. “This is due to the fact that such a rate consists of two parts - a fixed base percentage and a floating index (most likely, we will talk about the ruble MosPrime), which is always in dynamics. For comparison, at the beginning of this year, the index was 23.52%, in June - 13.42%, in November - already 11.82% (within 6-10% a few years earlier). That is, borrowers who take out such a mortgage run the risk of receiving unpredictable and higher than expected payments, and this is a direct path to the appearance of delinquencies on mortgage debts, ”explains Kristina Shulgina.
However, there are combined mortgage products on the market. The difference between combined rates is that the rate is not fixed for a year, as with floating rates, and not for the entire loan term, as with fixed rates. So, according to Irina Pavlova, now DeltaCredit Bank has a product with a combined rate - the first five years the rate is fixed, then the remaining period - from 7.75% + Mosprime 3M. “This product was in great demand among our customers in 2008-2014, in 2015 customers prefer a flat rate,” she says.
Sergey Velesevich; photo Alexander Ryumin (TASS)
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