Fixed Interest Home Loans

Fixed home loans have a fixed borrower’s interest rate, interest repayment and principal repayment for a fixed period of usually one to ten years or longer. This type of home loan reverts to the standard variable rate by the time the fixed rate period has ended, unless another fixed rate long term deal is set.

As a general rule, the average variable rate for a three-year variable home loan is higher than the fixed rate. Also, the fixed interest rate hits a low-point, six to nine months before the variable rate bottoms out. Since this is a fixed rate, it is not affected by the RBA’s interest rate adjustments.  This set-up is ideal for first home buyers or investors as it provides cashflow stability and secuitry in terms of loan repayments.

The basic disadvantage of a fixed home loan that it offers less flexibility and fixed repayments, even if the market interest rate drops.