Fixed rate home loans, like the name suggests, come with fixed interest rates for set intervals of time. Fixed rate home loans give you the security of a fixed interest rate for a given period; typically one, two, three, four and five-year fixed terms are the most common, but some lenders will allow you to fix your loan for up fifteen years! Having your home loan repayments fixed for a set period can give you added piece of mind and makes budgeting a lot easier.
Timing is crucial to lock in a competitive/low fixed rate for your home loan. Lenders will adjust their fixed interest rates well in advance if they can foresee rises in the Reserve Bank of Australia's (RBA) official interest rate. If rates have already started to climb, you may well be too late.
Fixed Rate Home Loan Advantages
- Your repayment amounts will remain unaffected if your lender increases interest rates (which can happen for several reasons).
- Having fixed interest rates gives you longer term certainty of your repayment amounts.
- Allows you to budget more accurately.
- Nearly every lender offers fixed rate home loans, so you’ll have a large range of lenders and loan products to choose from.
Fixed Rate Home Loan Disadvantages
- Your repayment amounts will not decrease if your lender reduces their interest rate, meaning you miss out on any benefit.
- Additional home loan repayments are either not allowed or limited during the fixed period.
- You may be penalised with fees if you exit the home loan before the end of the fixed rate period.
Most Suitable For
- First home buyers who may struggle should interest rates were to rise.
- Property buyers who like certainty.
Want to talk more about your home loan options?
If yes, then please get in touch with me today and I'll be happy to help. All my home loan and mortgage services (from the initial meeting, right through to home loan settlement) are completely free to you.