fixed or variable

Compare home loan interest rates – fixed or variable?

If you are starting to look around for a home loan you might be comparing different home loan interest rates and deciding if a fixed or variable loan is best for you. Here are the benefits for each option.

Fixed rate home loan benefits
• You will know how much your loan repayments will be for a fixed period, regardless of market interest rate changes
• You will be protected against interest rate rises
• You are generally able to make additional repayments up to a certain amount each year
• You can pick the time period to suit you – fixed terms are available from 1 to 5 years

Variable rate home loan benefits
• Your home loan repayments will fall when interest rates fall
• You have the opportunity to reduce your home loan balance faster by making additional repayments without a maximum amount
• It can be very flexible as you can change to a fixed rate loan later without incurring any break cost fees and often have additional features such as permitting loan redraws

Split loans
Alternatively, to get the best of both worlds you could consider splitting your loan into two; selecting a fixed rate term for one loan and a variable interest rate for the other. That way you get the security of knowing that your repayments won’t change on the fixed rate portion and flexibility to repay extra and take advantage of any interest rate decreases on the variable rate loan.

When choosing whether to select a variable or fixed interest rate for your home loan you need to decide whether you want the security of knowing your repayments will not change or the flexibility of a variable rate loan, or alternatively a bit of both with a split loan.

What type of loan do you think suits you best?

^Ryan, Product Manager

This is general information and does not take into account your personal financial objectives, situation or needs. You should consider this information in light of your own individual circumstances before making any investment decision.