Information on the pros and cons of Fixed Rate Home Loans in Australia

Fixed Rate Loans - Pros and Cons

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When interest rates are rising then borrowers start to investigate fixed interest rate loans in order to stop their loan repayments from ballooning out of control. Interest rates in Australia appear to be in an uptrend so more and more borrowers are taking up fixed rate loans. Here we explore the pros and cons involved.

If you currently have a variable loan and are considering moving to a fixed then our Variable vs Fixed Rate Mortgage Calculator allows you to compare costs between the two types and test the effects of future interest rate rises on repayments, allowing you to plan for the future.

Fixed Rate Pros

The interest rate on a fixed interest home loan stays the same for the term of the loan.

For those on a tight budget it gives peace of mind and helps to control expenses.

For those with a little bit of slack in their budget a good compromise is the split loan where one portion is fixed and the other variable. This way you receive part of the advantage in rate movements whether they rise or fall.

Investors have used fixed loans for years because they prefer to know what their expenses are up front and they don't require any special features.

Fixed Rate Cons

When interest rates are falling borrowers with fixed rate loans are locked in at their current rate until the end of the loan term.

If interest rates fall it is often possible to discharge a fixed rate loan early but only by paying a significant penalty. It pays to check out how these break costs are structured before you take out the loan.

If your circumstances change and you require a different type of loan then you are up for break costs as already mentioned.

Fixed loans often lack the flexible features of variable loans. For example making extra repayments off the principal is often discouraged by the use of penalties. A redraw facility, offset account and shorter repayment periods are often not available.

Financial Services Online is an emerging online exchange that connects interested consumers to various professional mortgage services companies in its Australia wide network. Fill out the online form for a free no-obligation quote on a fixed interest loan.

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