Fixed or variable rate loans?

Variable rate loans

Loans with a variable interest rate are often the most popular with borrowers.

Variable rate home loans offer the highest degree of flexibility with respect to extra repayments, portability and the ability to use an offset account.

There are a number of options to consider when looking at a variable interest rate loan including:

  • Whether a loan with an offset account or a basic home loan will best suit your needs
  • Which repayment frequency is right for you – weekly, fortnightly or monthly repayments
  • Can you afford extra repayments which can take years off your home loan

One key benefit of taking out a variable rate loan is the ability to change product, repayment type, frequency, amount and even lender with relevant ease. This is because there are generally little or no penalties associated with changing these elements with a variable rate loan.

Fixed rate loans

Loans with a fixed interest rate can offer borrowers certainty with a fixed repayment amount for the life of the fixed rate loan term, which is usually between one to five years.

Fixed rate loans are popular when people are looking to take some risk out of any potential upward movements in interest rates and know their monthly repayment will not change for a set period of time. This however can work in reverse if variable rates reduce but you are locked into a fixed term.

Property investors often consider fixed rate loans as they can provide piece of mind when looking at their overall investment decision.

Borrowers buying their own home should also consider fixed rate loans also and think if taking a part of their loan variable and another part fixed would best suit their needs.

There are a number of things to think about when considering a fixed rate loan such as:

  • Does the lender allow extra repayments when taking out a fixed rate loan?
  • What are the penalties if your pay out your fixed rate loan earlier?
  • How important is it to you to know your monthly repayment will not increase (or decrease) for a set period of time.

To discuss fixed and variable rate home loans as well as all your home and investment loan options give us a call on 1300 955 791 or leave your details and one of our home loan experts will contact you at a time suitable for you.


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