Below the table you can read our detailed guide and decide if fixing is right for you. fixed rate comparison rate Apply for the Virgin Reward Me Fixed Rate Home Loan - 2 Year $300k+ Special offer (Owner Occupier, P&I) and get a low interest rate with no application fee as well as a 100% offset account.
Virgin Money Home Loan Offer
Apply for the Virgin Reward Me Fixed Rate Home Loan - 2 Year $300k+ Special offer (Owner Occupier, P&I) and get a low interest rate with no application fee as well as a 100% offset account.
Compare fixed rate home loans
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What is a fixed home loan rate?
Australian home loans have two rate types: fixed and variable. The clue is in the name. Variable rates can rise and fall at the lender's discretion. Fixed rates don't change during an initial "fixed" period (usually between one and five years).
But there's a little bit more to it than that. Here are the quick facts on fixed home loan rates:
- Cost. A fixed interest rate is typically higher than a variable rate, though this depends on the loan and lender.
- Flexibility. A fixed rate mortgage is less flexible. You might not be able to make extra repayments and there may be higher costs for leaving the mortgage (to refinance). Always read the fine print on your mortgage contract.
- Features. If you're looking for an offset account with your loan then a variable rate might be a better option for you. Fixed rate loans with offset accounts are comparatively rare.
What happens when the fixed period on my interest rate ends?
You need to look at the revert rate. This is the variable interest rate that your fixed loan will switch to after the fixed period.
It might be higher than your current fixed rate, but it could be lower too. It depends on your lender, the product and the position of rates in the market at the time. If the revert rate is high, you should probably refinance your loan to a lower variable rate or ask your lender for a discount.
How do I compare fixed rate loans?
To find a good fixed rate product look at the following:
- A low interest rate. For any mortgage a lower rate will save you money. With fixed rates, borrowers typically hope that they can lock in a good rate now and be protected if rates rise. It's worth looking at variable rates and comparing the two.
- Low fees. Always pay attention to a loan's fees, especially annual or ongoing fees.
- Length. Fixed rate borrowers have to choose between one-, two-, three-, four- and five-year fixed rates. Most loans give you multiple options, with different rates for each. Shorter fixed periods are typically lower, so one-year fixed rates are more competitive than five-year fixed rates.
Should I fix?
Most Australians go for variable rate loans. They are more flexible products and tend to have lower interest rates.
But there are some good reasons to fix, especially right now when fixed rates have never been cheaper. Let's look at the pros and cons of fixing.
The benefits of fixing
The biggest advantage of a fixed rate is that your repayments won't change. This can offer you peace of mind and certainty around your repayments. You can budget accordingly and then forget all about rate changes until the fixed period ends.
And if variable interest rates rise, you might end up with a better rate than the average. But rate changes can be hard to predict.
The disadvantages of fixing
There are several reasons why fixed interest rates are less popular in Australia:
- Limited features. Fixed rate loans don't have a lot of flexibility compared to variable rate mortgages. Most lenders don't offer fixed home loans with 100% offset accounts.
- Break costs. If you decide to break out of a fixed rate loan before the end of the specified term, you may face a break cost. This can cost a few hundred dollars or potentially thousands. Read this guide to learn more about breaking a fixed rate loan.
- Rates could drop. If the RBA slashes the cash rate you could end up with a higher rate compared to variable home loans.
Are fixed rates cheaper?
The key thing to understand is that a fixed rate loan is about balancing a good rate with certainty about your repayments. If you're happy with the rate and don't think you'll need to refinance soon then fixing is not a bad idea at all. Just accept that if variable rates drop you may have to wait a while to refinance and take advantage of a lower rate.
If you fix your rate and then variable rates drop you'll end up worse off. But there are times when fixed rates go lower than variable ones. Look at the graph below.
In the later half of 2019 the most competitive fixed rates were actually equal to their variable counterparts. Now they're actually getting cheaper. While this is a rare occurrence it does happen.
Can fixing be cheaper even after paying break costs?
Breaking a fixed rate loan to refinance to a lower rate can be expensive. But if your repayments get significantly lower then you could still end up saving money in the long run.
Let's look at a quick example. Say you have a 3-year fixed rate loan with one year left on the fixed period. You fixed your rate at 3.90% and you have $400,000 remaining on your loan. The loan term is 30 years. Because fixed rates are lower now, your lender is offering a fixed rate of 3.30% for new borrowers.
You can use this lower rate to get a rough estimate of your breaking costs. The difference in your original fixed rate versus the current offer of 3.30 can stand in for the more complicated difference in funding costs. The basic break fee calculation is:
- Loan amount ($400,000) x fixed period remaining (1 year) x rate difference % (0.60%) = $2,400
Keep in mind that this is an estimate only, and every lender has their own way of calculating break costs.
So that's your breaking cost. Now consider the savings if you switched to a much lower rate from another lender, such as 2.19%. You'd easily save money even when paying the $2,400 because your repayments would be lower.
|Old loan||New loan|
|Saving minus break cost||N/A||$2,040|
In the first year after switching you'd save around $2,000 even after paying the break cost. And you'd save even more in the years after this.
The split rate alternative
If you're unsure about going with a fixed or variable rate many lenders allow you to split your loan into fixed and variable portions. This essentially lets you hedge your bets. Calculating the best split option for you can be complicated, your lender or a mortgage broker can help you do this.
Read more on this topic
NAB cuts rates for home buyers, beating out its Big Four rivals With owner-occupier rates falling to 2.19%, NAB is now the most competitive of the Big Four banks.
Hume Bank Fixed Home Loan - 2 Year Rate A review of the Hume Bank Fixed - 2 Year Rate. Learn more about this product.
How to cut $5,000 in home loan interest in one year The ACCC is urging consumers not to settle for the advertised headline variable rate when considering a new home loan.
Reduce Rate Slasher Variable Home Loan A review of the Reduce Rate Slasher Variable Home Loan. This loan has a 100% offset account.
Buying and selling property during coronavirus Your guide to property transactions during the coronavirus pandemic.
Fixed rate home loans are now the lowest rates on the market The coronavirus, financial forecasts and RBA decisions have made fixed mortgage rates incredibly competitive. For now.
Coronavirus and home loan refinancing The coronavirus pandemic is a good time to look at refinancing your mortgage to recession-proof your finances.
Rental relief and coronavirus: Support for Australian tenants who can't pay rent A guide to renter support during coronavirus, include government policies, welfare payments and more information for tenants who can't pay rent.
Coronavirus mortgage relief and repayment help A run-down of the coronavirus support packages offered by Australian lenders and other ways you can get help.
Every lender passing on the RBA's surprise second March 2020 rate cut Check if your lender is passing on the cut and offering you a lower variable mortgage rate (and if they're not, here's what you should do).
Home Loan OffersImportant Information*
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate(*now 2.59%, drops to 2.49% on 17 Jul)
Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
ME Flexible Home Loan Fixed with Members Package - 2 Year Fixed Rate LVR <= 80% (Owner Occupier, P&I)
Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.
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