2. What are the risks of fixed rate products?
Fixed rate loans and interest rate swaps give known, fixed payments. But they also expose borrowers to risks, including:
- The risk of paying higher interest than with a variable rate;
- The risk of having to pay Early Repayment Charges or Market Break Costs; and
- The risk of incurring Contingent Liabilities which may impair their credit status and their ability to switch between lenders.