Fixed or variable rate - which is better?

This is the first question almost every borrower asks. The honest answer: it depends on you, not on the market.

Fixed rate

The payment doesn't change over the whole period. You know exactly what you'll pay 15 years from now.

• Advantage: total certainty. Peace of mind.
• Disadvantage: the rate is higher - you pay for the security. And the early-repayment penalty can be high.

Variable rate

The rate updates at defined points in time (or moves with the prime).

• Advantage: a lower starting rate. Flexibility - prime has no repayment penalty.
• Disadvantage: the payment can rise. You need the ability to absorb it.

How you really decide

Ask yourself three questions:

1. If the payment rose by ₪800 a month - would that break me? If so, you need more fixed.
2. How long do I plan to stay in this loan? A short horizon leans toward flexibility.
3. Do I have a safety cushion? Without one, volatility is a real risk.

The practical answer

In most cases the answer isn't "either-or" but a combination. A fixed portion that gives a stable floor, and a variable portion that lowers the total cost. The ratio between the two - that's what needs to fit you.