Information, money saving tips and commentary on Fixed Interest Home Loans in Australia

Fixed Interest Rate Home Loan

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What is a Fixed Interest Home Loan?

A Fixed Interest Loan allows you to fix the interest rate for a set term (usually 1 - 5 years) unlike a variable rate home loans where the interest rate varies according to market forces. When the loan reaches the end of its term you may be able to roll over into a new fixed term loan at the prevailing interest rate, or convert to a variable rate loan.

Fixed interest loans are popular when interest rates are rising and borrowers want to lock in a rate that will insulate them from excessive rises in repayments. However no-one has a crystal ball which can accurately predict future interest rate rises. Locking in an interest rate is a two edged sword. Interest Rates can rise or fall. One option available to borrowers is to take out a split loan. Part of the loan can be taken out as a fixed rate loan and the other part as a variable rate loan.

Property investors often like fixed interest loans as they enable them to sleep at night when interest rates are rising. Knowing their future costs assists in budgeting and forecasting projections for investment planning. It can also provide a breathing space and allow time to build cash reserves and make contingency plans.

The unpredictablity of interest rates make fixed rate loans a gamble, but for some borrowers the comfort and security provided is worth the risk.

Std Variable Rate Loan
Basic Variable Rate Loan
Fixed Interest Loan
Split Loan
Home Equity Loan
Debt Consolidation Loan
Low Doc Loan
Non-conforming Loan
Line of Credit
Interest Only Loan
Reverse Mortgage
Construction Loan
Renovation Loan
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Fixed Interest Rate Loans

Features of Fixed Interest Rate Loans

A Fixed Interest Rate Loan is usually 1 - 2.5% more expensive than a variable rate loan. Probably the main advantage of fixed interest rate loans is the stability of knowing what your repayments are going to be for the period of the loan. This is particularly important for investors with multiple properties, especially if they are negatively geared.

It is important to realise that if official interest rates fall you may end up paying more in repayments than if you had a variable rate loan.

Fixed Interest Loans do not usually have many of the features found in Variable loans, such as repaying the loan without penalty.

Benefits of Fixed Interest Rate Loans

  • Stability of repayments makes budgeting easy.
  • Possible cost savings when interest rates are rising.

Tips and strategies

  • Avoid loans with monthly account fees
  • Making weekly or fortnightly repayments pay's your loan off faster than monthly payments because you are making 1 or 2 extra repayments per year
  • Have your wages paid into your loan account to reduce interest and use the interest-free period on a credit card for purchases before paying the credit card bill from the loan account
  • Put lump sum payments like tax refunds into your loan account. If required later use the redraw facility.

Example Rates and Fees

Fixed Rate Home Loan NO FEES (October 2012):
  • Monthly fee NIL
  • Annual fee NIL
  • Redraw fee NIL
  • Extra Payment fee NIL
  • Fixing fee NIL
Low Rate 5.85%
CCR 6.18%*
*Based on $250,000 Loan over 25 years.

You can apply over the Internet Lending Professional for a free no-obligation quote on a Fixed Interest Rate Loan.


Thank you for visiting our Fixed Interest Loan web-page. We hope the overview has proved useful.

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