What is a fixed rate?
A fixed rate loan allows you to lock your interest rate in for a period of time. This means that your repayments will be the same for the fixed term you choose and you’ll be protected against any interest rate increases during this period of time.
What you need to know
- You won’t benefit from any reductions in the interest rate but your repayment won’t increase if/when interest rates increase.
- Fixed rate terms are generally available for 1, 2, 3, 4 or 5 years. Commonly fixed rates are selected for 1 or 2 years.
- If you choose to exit a fixed rate loan before the fixed term expires, you may need to pay
a ‘Break Fee’ which will be determined by your lender at the time of exiting. The break fee may be very high. Generally, the more interest rates have come down since you took on your fixed rate loan, the higher the break costs will be. - Your chosen lender may limit additional repayments into your fixed rate loan or you maybe charged a fee for exceeding the limits.
- Some lenders may not allow an offset account or redraw function during the fixed rate term or this could be limited.
- Your rate may change between submitting an application and the loan settling. Rate Lock can guarantee your fixed interest rate in case rates increase before the loan settles. This will lock in the interest rate of your fixed interest home loan before your loan application settles. You should remember that your lender may charge a rate lock fee, although discuss this with your broker as some may offer it for free for up to 60 days.
- Because your repayments don’t change during the fixed rate period, Fixed rates can give you certainty of repayments and assist you with budgeting a set amount.
When should I fix?
There’s no one-size-fits all approach for when to fix your loan rate. Locking in your fixed rate depends on your financial goals and situation.
Ask yourself these questions:
- How concerned are you about interest rate increases?
- How important is it for you to have repayment certainty?
- What degree of flexibility do you want with your loan?
Fixed home loan rate specials
Lenders and banks compete heavily in the fixed home loan space and the competition can exist with rates and loan terms. A mortgage broker can assess your personal situation and give you options and the information you need to make the right decision. They will show you the fixed rate products of various lenders and knows the most competitive rate.
Need more information?
Fixed rate requirements may differ between lenders so it’s important to understand your chosen lender’s requirements. It should be remembered that this fact sheet is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any individual and must not be relied upon as financial product advice. As this information has been prepared without considering your objectives, financial situation or needs you should, before acting on this, consider the appropriateness to your circumstances. As always, if you have any questions, you can contact your broker.
Licensing statement: Rayne Finance ABN [70 605 100 838] is authorised under LMG Broker Services Pty Ltd Australian Credit Licence 517192. Disclaimer: (1) As with any financial scenario there are risks involved. This information provides an overview or summary only and it should not be considered a comprehensive analysis. You should, before acting in reliance upon this information, seek independent professional lending or taxation advice as appropriate and specific to your objectives, financial circumstances or needs. This publication is provided on the terms and understanding that: (2) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication. (3) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to the maximum extent permitted by the law to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication.
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