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Should I fix my home loan?

Should I Fix My Home Loan | RateCity

Applying for a home loan requires making many decisions. The option to fix your interest rate or not is one that many people struggle with. There are positives and negatives for both but with a little bit of research you can make an educated decision that will suit your personal requirements.

Typically when the gap between fixed and variable rates widens due to either an increase in variable rates or a decrease in fixed or both, it could be the right time to fix.

Another good time would be if fixed rates were not much higher than the average basic variable rate. For example if the difference between the two was only 13 basis points, say the current average basic variable rate was 6.97 percent, and some lenders were offering their three-year fixed loans at 7.1 percent, it could be worth fixing.

This means that the basic variable rate will only need to increase by 25 basis points in six months for you to be $500 better off on a $300,000 loan.

Below are some other tips that may help you to decide whether it is the right time to fix your home loan or not.

  • A general rule of thumb to follow is that you should only consider a fixed loan when the gap between average variable and fixed rates are less than 1 percent.
  • If you think that rates will rise in the future and fixed rates are lower than normal it could be a good time to consider fixing.
  • When interest rates are on the upwards direction of the cycle it should also be a good time to fix. Just be sure to work out how much variable rates have to increase before you can save with fixed rate home loans.
  • When shopping around for a mortgage do your research, which includes comparing the difference between both fixed and variable rates. To see what is on the market, compare home loans online at comparison sites like RateCity.
  • A good time to choose a variable loan is when interest rates have reached their peak of the cycle and are likely to start falling. Avoid fixed rates at this time.

The pros and cons of fixing your home loan


  • When you have a fixed loan it’s much easier to budget as the repayments won’t change during the fixed period.
  • Interest rate rises are irrelevant so you won’t have to worry about rate increases raising your mortgage repayments.


  • Interest rate drops won’t benefit you. You could end up paying a higher rate than the variable.
  • If you want to get out of your fixed home loan costly break fees could apply.
  • You are less likely to be able to make extra repayments on a fixed home loan without incurring a fee.

Regardless of whether you are a first home buyer or you want to refinance your current mortgage, make sure you do your research before leaping into a home loan. Always take the time to read the product disclosure statement (PDS) so you are aware of all of the terms and conditions on the loan before you sign anything.

Want to fix your home loan? Start searching for a great fixed home loan with the RateCity home loan comparison tool.

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