Fixed Rate Home Loans

If you’re worried about rising interest rates, then a fixed rate home loan may be the solution.

Fixed rate home loans offer a fixed interest rate for a set period of time. Because of this, repayments remain the same for the duration of the fixed rate period, usually between one and five years. At the end of the fixed rate period, you can switch to a variable rate loan or re negotiate a new fixed rate or even opt for a split rate loan.

Benefits

• Stability – fixed repayments allow you to plan your finances and stick to your budget, even in times of economic uncertainty.
• Cost – when interest rates rise,repayments won’t increase.

However, fixed loans generally have limited features and often charge hefty fees for early payout or for making additional repayments.

When to fix

Knowing exactly when to fix and when to go variable is always a difficult choice. Even the best economists can’t predict with absolute certainty when interest rates will rise or fall. For this reason, many borrowers opt to fix for periods of around three years. That way if rates do fall, you are only paying a higher rate of interest for a relatively short period.

Features at a glance

• monthly repayments remain the same
• interest rate fixed
• some lenders charge hefty exit fees if you break the fixed rate term
  
• less flexible features
• limited repayment and redraw options