The borrower benefits from reduced margins to the underlying cost of borrowing compared to fixed or capped rate mortgages where the lender must hedge against potential interest rate changes where the borrower benefits if the interest rate falls and loses out if interest rates rise.
The borrower benefits from reduced margins to the underlying cost of borrowing compared to fixed or capped rate mortgages. The lender must hedge against potential interest rate changes; the borrower benefits if the interest rate falls and loses out if interest rates rise.