Fixed Rate Mortgage

The interest rate is fixed for a certain period, usually the first one to five years of the loan. This means your regular repayments stay the same regardless of changes in interest rates. At the end of the fixed period you can decide whether to fix the rate again, at whatever rate lenders are offering, or move to a variable loan.

Pros

  • Your regular repayments are unaffected by increases in interest rates.
  • You can manage your household budget better during the fixed period, knowing exactly how much is needed to repay your home loan.

Cons

  • If interest rates go down, you don’t benefit from the decrease. Your regular repayments stay the same.
  • You can end up paying more than someone with a variable loan if rates remain higher under your agreed fixed rate for a prolonged period.
  • There is very limited opportunity for additional repayments during the fixed rate period.
  • You may be penalised financially if you exit the loan before the end of the fixed rate period.

Traditionally Fixed Rate loans were very rigid in their offering with very little of flexibility– they literally were fixed. Now lenders are starting to ease their fixed rate loan policies and we are starting to see more features available. It’s not uncommon to now have the capacity to pay extra into a fixed product and to even have it attached to an offset account.

The mortgage brokers at Blackburne can talk you though what Fixed Rate products are available and if its right for your requirements and financial goals.

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