Factors Affecting The Current Economic Environment Essay

1998 Words Oct 5th, 2014 8 Pages
Is it preferable to fix or float interest rates in the current economic environment? This is the question now facing Marcus Garvey, who is planning to buy his first home in October of this year. Making the right judgement on whether to fix or float interest rates on a mortgage, in conjunction with what period of time, could be the difference of thousands paid to the bank in additional interest. In order to assist Marcus in this decision, several variables must be considered. The first and most significant factor is to determine what interest rates are expected to do in the short term future. Secondly, to assess the advantages and disadvantages of both fixed and floating loans and how these will affect Marcus, based on the information we know about him. In addition, we give attention to the unknowns’ of Marcus’s situation that may lead to an alteration in recommendation. Thirdly to consider how long of a fixed period would be recommended to have the maximum economic benefit for Marcus if he decides to go with this option. Based on the information given regarding Marcus, along with what has been learnt about the current environment, it is decided to recommend that Marcus either fix his entire mortgage, or fix the majority while leaving a modest portion floating. There are many variables that ought to be considered when deciding to fix or float and not knowing Marcus’ situation in relation to these variables, this would be the safest option.
Sorted defines a fixed rate as a…

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