Floating Rate Mortgage
A floating rate mortgage features interest rates that adjust periodically based on benchmark rates such as EIBOR, resulting in variable monthly payments that fluctuate with market conditions throughout the loan term.
| Rate Components | Structure |
| Benchmark | EIBOR (1-month or 3-month) |
| Bank margin | 1.5-3% added to benchmark |
| Total rate | Benchmark plus margin |
| Adjustment frequency | Monthly or quarterly |
| Rate Example | Calculation |
| Current 3-month EIBOR | 5.2% |
| Bank margin | 2% |
| Current rate | 7.2% |
| If EIBOR rises to 6% | New rate 8% |
| If EIBOR falls to 4.5% | New rate 6.5% |
| Advantages and Risks | Factor |
| Initial rate | Lower than fixed |
| Rate decrease benefit | Full participation in declines |
| Budget uncertainty | Payments can increase significantly |
| Long-term cost | Unpredictable total interest |
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