Fixed Rates

Fixed interest rates are on the rise in popularity, and it doesn’t look like they’ll slow down anytime soon, especially when fixed rates are currently lower than variable rates. So, how do you determine if fixed rates are right for you or if it’s an opportune time to opt for them? Let’s delve into this topic.

I. Fixed Rate Basics

  • What Are Fixed Interest Rates?
    Fixed interest rates, often referred to as fixed rate home loans, are interest rates that remain unchanged for a specific duration, typically one to five years. Unlike variable rates that may fluctuate, fixed interest rates offer you guaranteed certainty on your loan repayment.
  • Why Are Fixed Interest Rates Significant?
    Fixed rates are essential for mitigating market risks, making them a prudent choice for many homeowners.

II. The Benefits of Fixed Interest Rates

  • Stability in Your Repayments:
    If you dread the idea of your loan repayments going up, fixed interest rates offer stability. Your repayment stays constant during the fixed period, giving you peace of mind.
  • Case Scenario:
    Imagine fixing a $300,000 home loan at 4.50% for five years. If the RBA hikes interest rates by 2.50% after two years, your rate stays at 4.50%. It provides predictability, essential for financial planning.
  • Limitations of Fixed Rates:
    However, it’s worth noting that fixed rates come with certain restrictions, mainly in comparison to variable home loans.

III. When Fixed Rates May Not Suit You

  • Limited Additional Repayments:
    Australian lenders often limit the amount you can pay in additional repayments annually. Making extra payments over the set ones may incur a penalty, a critical consideration.

IV. How to Choose the Best Fixed Rate Mortgage

Flexibility & Features:
Banks offer various fixed rate features, so how do you select the right ones?

  • Rate Lock: Secure the interest rate at the time of loan application for an extra fee.
  • Extra Repayment: Different lenders allow varying amounts for extra repayments.
  • Redraw: Some lenders permit withdrawal of extra repayments without massive fees.
  • Interest In Advanced: A product for property investors offering bulk tax deductions.
  • Fixed Rate Offset: Few lenders offer 100% fixed rate offset account.
  • Fixed Rate Construction Loans: A rare option but available with some lenders.
  • Split Loan: Part of your loan is fixed, and part is variable, giving flexibility.

V. Should You Fix Your Rate?

Your choice between a fixed or variable rate depends on your individual circumstances.

If you’re considering purchasing or refinancing, our team at OzBroker can assist. We simplify the home loan process, and our experts will guide you through every step, including completing your first home buyers grant application.

Our service comes at no cost to you, as we’re compensated by the lender when your home loan settles.

Contact us today to discuss your deposit, lending, and investment lending options!

Got any questions? Need further advice?

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