Fixed Rate Home Loans
Fixed home loan rates provide you with the insurance of a set home loan repayment amount for a pre-determined period of time a good broker will help you determine what length the fixed term should be on your home loan, based on your financial situation and your personal preferences.
Fixed home loan rate specials
Normally at least one lender will have a special on fixed home loan rates at any given time, which may help you with your decision on whether or not to choose a fixed home loan. If you would like to know what fixed home loan rate specials are available to you, talk to your mortgage broker, or visit our special home loan offers page.
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How do fixed rates work?
Fixed home loan rates lock in a specific interest rate for a term ranging from six months to 10 years. Currently about one fifth of all home loans in Australian are fixed. With variable interest rates hitting record lows, experts expect that the number of people looking at a full or partial fixed home loan rate will rise. You should however check with your Loan Market mortgage broker before making a decision to fix.
What about flexibility and fixed home loan rates?
Traditionally, fixed home loan rates provide interest rate and repayment certainty but little flexibility. Although still not as flexible as a standard variable rate home loan, fixed home loan rate flexibility has improved over recent years.
For example, with many fixed home loan rates, you are now able to make additional repayments up to a set amount without being penalised. A home loan offset account may also be available. Some lenders will allow more flexibility, especially if they are promoting a fixed home loan rate special. Your Loan Market mortgage broker will be able to confirm what features are available for the specific fixed home loan rate you are considering.
Be aware, with fixed home loan rates you are likely to be liable for hefty exit fees if you pay the loan out before the end of the fixed rate period.
Break costs on fixed home loan rates
When interest rates fall, you may look at your current fixed home loan rate and think you would be better off refinancing to a variable home loan rate to take advantage of interest rate cuts. However, you should be aware that there are break costs associated with exiting a fixed home loan rate early.
Break costs are made up of two components; a relatively small home loan exit fee, and another fee that covers the economic cost to your lender of no longer having your fixed rate home loan.
It is this second fee that can make exiting a fixed home loan rate an expensive exercise. Each lender has a different way of calculating break costs, but generally speaking, they will want to recover the cost of the interest and fees you would have paid to them had your fixed rate loan run its full term. The earlier in the loan term you exit a fixed rate, and the larger your loan, the higher your break costs will be.
You should also be aware that there are also likely to be some fees to set up your new variable rate home loan too, particularly if you are also changing lender. A list of likely fees and charges can be viewed under Home Loan Fees and Charges.
When should I fix versus going variable?
Many consumers are unaware that the variable rates move differently to fixed rates and by the time variable rates have bottomed they have missed the best opportunity to secure a fixed home loan rate. While variable interest rates are influenced by the Reserve Bank, fixed rates are quite different. Fixed rate pricing is driven by those who invest in the fixed rate wholesale markets.
If you are considering fixing your home loan but don’t know when to make the move, the lowest fixed home loan rates are generally available when variable interest rates are between three and nine months off hitting their bottom. Keep in mind that there are often specials available on fixed home loan rates that may also make this option more attractive to you.
As many people opt for a fixed home loan rate for the certainty it provides over repayment amounts, you should consider fixing your home loan whenever the loan terms, conditions and features are suitable for your situation.
It’s important to always consider your financial situation and motivation for fixing to determine if a fixed rate home loan is the right choice for you, regardless of the interest rate environment at the time.
If you require certainty of mortgage repayments, fixing all or part of your home loan is certainly an option worth considering. Your mortgage broker will assist you in finding a suitable fully or partially fixed home loan rate with the right structure at any time you need one.
Secure a fixed rate home loan
To secure a fixed home loan rate or to get an assessment of the fixed term that is in your best interest, talk to your local Loan Market mortgage broker on on 0508 722 205 (+64 9 526 0122).