23 Feb 2021

Making a Mortgage Choice? Here’s When a Fixed-Rate Home Loan is Perfect!

Making a Mortgage Choice? Here’s When a Fixed-Rate Home Loan is Perfect!


If you’re thinking about a fixed-rate home loan or even refinancing to a fixed-rate loan, you’re not alone.


After the Reserve Bank of Australia slashed the interest rate to 0.1%, the vast majority of Australian mortgage lenders cut fixed rates below 2%.


So, does that mean a fixed-rate home loan is right for you? Let’s take a look…


Why Choose a Fixed-Rate Home Loan?


Choosing a fixed-rate home loan means locking in the interest rate throughout the entirety of the fixed-rate period. So, your rate will remain the same even if the lender you’re borrowing from changes their rates.


That framework comes with several advantages:

  • Because your payments will be consistent until the end of your fixed-rate period, budgeting becomes easier.
  • Fixed rates are currently at the lowest levels they’ve ever been, so you’ll save more compared to previous fixed rates.
  • You’ll have advantageous payments if the variable interest rate climbs since that won’t affect your loan during the fixed-rate period. While the payments of everyone on a variable rate are going up, your payment will remain the same.


Why Avoid a Fixed-Rate Home Loan?


While a fixed-rate home loan is often a great choice for individuals seeking consistency over a long period of time, these mortgage options have a downside.


Here are the cons of a fixed-rate home loan:

  • Managing repayments can become an issue at the end of your fixed-rate period, as your loan will switch to variable rates, which could be higher than your fixed rate.
  • You’ll have to pay break costs—which can be if you refinance or close the loan when you sell your property before the fixed period ends.
  • Fixed-rate home loans offer less flexibility. For example, you’ll likely have a limit on the number of extra repayments you can make during the fixed-rate period.


To discover more about fixed-rate home loans or to get started today, click here.


Considering refinancing to a fixed-rate home loan? Use Mortgage House’s Switching Mortgage Calculator to gain the information you need.

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