When choosing a home loan there are generally a few options available;
- Fixed rate
- Variable rate
- Split rate
Unlike a variable rate loan whose interest rate moves with the market rate, a fixed rate home loan will be set for a certain period. After the fixed period ends, generally from 1 to 5 years, you can decide to switch over to the variable interest rate or even opt to fix your loan for another few years.
Fixed rate home loans have been popular in Australia in recent years. However if we look to the past for answers will simply show that nothing is certain in the property market.
At the end of 2008 when interest rates were at their peak many homeowners locked down their rates, afraid that they would climb into double digits. However, in April 2009 the Reserve Bank dropped the cash rate to 3.00% leaving many of those who fixed the year earlier in strife.
How to decide on a fixed interest rate?
If you are the type of person who enjoys a degree of financial certainty then a fixed rate is the way to go. Knowing that your monthly repayments won’t be affected by economic conditions can also provide you with security and the ability to budget carefully.
Making additional repayments towards your mortgage, without being slapped with fees, is also one of the major benefits of a fixed rate.
The table to the right displays some of today’s best fixed rate home loans.
If you would like to compare more fixed rate loans or other mortgage products, visit our home loan comparison.