Question

Which of the following statements is most TRUE?

Select one:

a. If you are expecting interest rates to go up then it is best to lock in a fixed interest rate.

b. If interest rates are expected to rise slightly then most people will pay less total interest on a variable interest rate loan than on a fixed interest rate loan.

c. Moving from fortnightly to monthly payments is a good way to reduce your overall loan repayments because the money earns interest in your bank account for longer.

d. The term of a mortgage increases with the size of the regular repayments.

e. Principal and interest mortgages are generally unpopular because the whole of the principal must still be repaid at the end of the loan.

Answer 1

If the interest rates are lower, but it is relatively expected to increase in the future, it will always be advantageous to park your money in the fixed interest rates for the longer duration because it will help in extracting a higher rate of interest for the longer period of time.

All the other statements are relatively false because principal and interest mortgage are still popular and moving from fortnightly to monthly payment is not a good way to reduce overall loan repayment.

Correct answer will be option (A) when you were expecting interest rates to go up, then it is best to lock in the fixed interest rates.