When interest rates are on the rise, more Australians with a variable rate home loan begin to consider a fixed mortgage option. This is because rising interest rates mean higher mortgage repayments for variable loans. But with a fixed mortgage your repayments are set for a chosen period of time. The more popular fixed rate loans tend to be 1 year fixed rate home loans and 3 year fixed rate home loans, although they can be as much as seven years or longer.
Why fixed rate mortgages?
When interest rates are rising in the market, fixed mortgage rate are generally always higher than variable rates because variable rates are unpredictable to an extent some prefer the stability of a fixed home loan. Most of the time a fixed mortgage will cost more than a variable rate so the best option is to pretend you are on a fixed rate and make extra repayments to a variable mortgage.