Generally speaking, there are 2 types of mortgages: variable rate and fixed rate. With the variable rate, your interest rate changes with the ups and downs of the bond market. With the fixed rate, your rate remains the same for a stipulated period, usually 5 years. Assume, for the sake of the argument, that the efficient markets hypothesis is correct and that it operates in the bond market where the interest rates that influence mortgage rates are set. How should you go about in deciding between a variable rate and a fixed rate?

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Variable Rate Loans A variable rate loan has an interest rate that adjusts over time in response to changes in the market Many fixed rate consumer loans are available are also available with a variabl... View the full answer