Question

If interest rates increase, will more of your payment go towards principal? Discuss this issue.

If you project interest rates to increase, which mortgage should you choose, a fixed rate or variable rate?

Answer 1

If interest rates increase and you have variable rate paying debt, then more of your payment go towards repaying interest and less of principal amount. So it will take more time to repay the debt.

So, the answer for the first question is is when interest rate increases more of your payment go towards repaying interest not principal.

Second Question

If you project interest rates to increase, a fixed rate mortage loan would be preferable rather than a variable rate as you need to pay only a fixed EMI to repay the debt but for variable mortgage you need to pay higher to repay your debt.