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Authority must be careful with variable rate financing
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Editor, Which is better, a fixed or variable rate loan? In an unstable market variable rates are too risky. As a result, people are losing their homes from variable interest rates that have ballooned and have increased their mortgage by hundreds or thousands of dollars.
Everything indicates that the mortgage trend will continue to intensify. Experts have identified the financial turbulence as the worst seen since The Great Depression around the globe and the Hinesville mortgage market is no exception. Simply put, the credit and liquidity crunch has spared no one. All financial institutions saw the premiums charged for their financing increase.
In my opinion, the best way to decide fixed or variable is to calculate various rate scenarios to see which mortgage option looks the best. In reality, most variable rate mortgages offer an option that allows them to be turned into fixed rate mortgages at any time. Some even have the option of setting a rate ceiling for the borrower. Subsequent to the changes that have affected the mortgage market, we can no longer assert that variable rate mortgages are largely better than fixed rate mortgages.
Given our economic and financial scenarios, which call for interest rates to start to climb in mid-2010, a fixed, five-year mortgage currently seems very attractive for many borrowers.
If the LCDA wants a variable rate mortgage they must make sure LCDA and taxpayers are protected in case interest rates rise sharply, and they have the ability to manage an increase in mortgage payments. The financial situation and the tolerance for risk must be taken into account. The evolving situation in the financial markets could make us review this issue again if as more changes hit the mortgage sector.
Which is better, fixed or variable interest rate during economic crisis? Be careful with variable.
I think LCDA staff and board members will use all resources and make the best decision for us taxpayers.

Concerned taxpayer
Graylan Quarterman

Editor’s note: Quarterman is a former member of LCDA, who resigned earlier this year because his work has taken him overseas for a time.
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