In the Enda scenario, fixing the rate for five years would most likely result in which outcome when rates rise afterwards?

• A. Enda has saved money by fixing the rate for the first five years.
• B. Enda was unwise to fix the rate for the first five years.
• C. Enda has lost money by fixing the rate for the first five years.
• D. Enda has neither gained nor lost as a result of fixing the rate.

Answer: (A)

Locking in a rate for a fixed period protects you from future rises in market rates. If rates climb after five years, having paid the fixed rate during those initial years means your payments were set and likely lower than what they would have been under a rising variable rate. So Enda would have saved money by fixing the rate for the first five years.

In contrast, choosing to fix would not inherently imply a loss or a missed opportunity in this scenario; the hedge against higher rates during the fixed term is the benefit. The idea is that certainty during the five-year window translates into actual savings if rates rise afterward.