One of the important parameters of a mortgage is the interest rate fixation period. This is the period during which the bank cannot change the interest rate you have agreed. Fixing the interest rate for a certain period of time helps people plan their family budget better. This is because they know the exact amount of the monthly mortgage payment several years in advance.
Offered fixation periods
Domestic banks usually offer interest rate fixation for 1, 3, 5, 7 or 10 years. Some banks offer longer fixation periods – for example, 15 years. Czechs most often arrange mortgages with a five-year fixation. The mortgage applicant chooses his/her preferred fixation period. The mortgage contract specifies the exact date until which the agreed interest rate applies.
Short versus long mortgage fixation
The shorter fixation period (up to and including five years) is advantageous for people who arrange a mortgage in a period of high interest rates and expect rates to fall gradually. On the other hand, longer fixing periods are more often chosen by people who have a mortgage with a very low interest rate and want to keep a favourable rate for as long as possible.