How to ensure that your repayments do not fluctuate for one whole year
Unlike variable home loans, one year fixed rate home loans have an interest rate that does not fluctuate. Fixing your mortgage can be an option to consider if you want certainty with your repayments. Any eligible borrower can apply for a fixed rate home loan, although how much you can get approved for will depend on your current debt, assets and income.
Banks, credit unions and other lenders will usually offer fixed mortgages, and your suitability for this type of loan depends on your lifestyle and financial plans. For instance, you can fix your mortgage for a year if you want to free up your finances and take care of other commitments. A mortgage broker can help you determine whether a fixed home loan would be suited to your needs and also help you choose the best time to fix it so that you save money on interest rates.
1 year fixed rate home loans
Rates last updated June 28th, 2017.
- NAB Tailored Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier P&I)
Comparative rate decreases by 0.01% | Interest rate decreases by 0.10%
January 16th, 2017
- NAB Choice Package Home Loan - 1 Year Fixed (Owner Occupier P&I)
Interest rate decreased by 0.10%
January 16th, 2017
- CUA Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Comparative rate increases by 0.01% | Interest rate increases by 0.15%
January 19th, 2017
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What is a fixed one year mortgage?
As the name suggests, a one year fixed rate home loan is a mortgage that has a rate that does not change for a year. This is different from a variable home loan where the rate can change each month as the Reserve Bank of Australia revises ongoing market rates and economic factors change. A fixed interest rate will help you keep your repayments constant, making it easier to organise your repayments. A fixed rate can also protect you from rising interest rates within the year, which would end up making your mortgage repayments higher.
Although a fixed home loan can help you save money if interest rates rise, you should consider if it’s the right type of loan for you before signing the paperwork. This is because such a loan usually has very high break costs if you exit early, and you will most likely not be allowed to make unlimited additional payments.
How does a mortgage fixed for one year work?
A one year fixed rate home loan is basically just a normal home loan with a rate which doesn’t fluctuate for 12 months. Fixed loans come with fewer features, which could mean that you may not have the option to make unlimited repayments or get an offset account. This usually means that you’ll have a cap on how much extra you can repay each year, and there are exit fees if you decide to get out of the mortgage before the one year period runs out.
If you are looking for the certainty of knowing how much interest you will pay and are keen to plan your mortgage repayments in advance, a one year fixed rate home loan might suit you. You can also get this type of loan if you are a first home buyer and are looking to keep repayments down and predictable. The flipside to such a loan is that you will not benefit if interest rates come down during the fixed rate period.
What are the types of one year fixed rate home loans available?
Choosing the right type of home loan can make owning a home much easier and ensure that you adjust your mortgage spending to fit your current financial situation. Here are the different types of home loans available to you:
- Bad credit home loans. If you’re having trouble accessing a home loan from a bank due to bad credit, you should consider getting a bad credit home loan from other lenders who are lenient when it comes to credit scores and mortgage eligibility requirements.
- Basic home loans. One year fixed home loans fall under this category, as they usually have few features such as no additional payment options and no redraw facility or offset account. This usually means they also have lower fees.
- Full featured home loans. These are home loans with features such as a redraw facility and 100% offset account. Most will allow additional repayments. The types of features you get on such a loan will depend on the specific lender you choose and the features you prefer.
- Package home loans. These loans come with a package deal, where you get other services from your lender to entice you to take up their mortgage facility, for example a bank account and credit card.
- Low doc home loans. Investors and those who are self-employed can get this type of loan, as there are no requirements to supply payslips and other documents that prove your source of income.
How to compare one year fixed rate home loans
The decision to take up a one year fixed home loan should be determined by your finances, lifestyle and how you plan to handle your mortgage repayments. For instance, if you want to purchase property and then sell it within a year, such a loan would not suit you as the exit fees would be high if you had to get out of your loan before the term ended. Locking the interest rate on your mortgage can make it more affordable, so here are some features you can look at when comparing fixed rate mortgages from different banks and other lenders:
Home loans fixed for a year will usually have normal mortgage fees such as establishment and legal fees, and they may also carry penalty charges for exiting the loan or making additional payments. Check the fees on different fixed rate loans to ensure you get one with reasonable fees and fewer penalties.
It's a good option to pick a home loan with the features that you want depending on your finance. This may include extra repayments, a redraw facility or cash incentives. If you are looking to cut down on costs, choosing a home loan with fewer features might be better, as the fees on such loans would be lower.
Fixed and revert rate
Shop around for a fixed home loan with a competitive rate, and be sure to ask about the revert rate that will apply on the mortgage after the fixed period expires so that you are not caught off-guard by higher rates later on.
Pros and cons of a home loan fixed for a year
- Relatively short fixed term. With a home loan fixed for one year, you do not have to worry too much about interest rates falling as the fixed term will expire after 1 year which will allow you to take advantage of a low interest-rate environment if need be.
- Easy to manage. These loans usually have no additional payments or redraw facilities, which means that you will not have to think about doing many things during the fixed period. In addition, repayments do not change, meaning that you get more control over how much you pay and are therefore able to plan in advance.
- Stability. Having a fixed rate mortgage gives you more stability than variable rate loans. Should the RBA raise interest rates, you will not have to worry about paying more and you could even end up paying less on your mortgage than on a variable rate loan.
- High exit fees. You will be charged a hefty exit fee should you opt out of the loan during the fixed rate term.
- Less features. These loans do not have many features, and they may not allow you to make any additional payments or redraw the funds you have.
Things to avoid about one year fixed mortgages
The biggest pitfall with any fixed rate home loan is to fix at the wrong time, meaning that you may be stuck with higher interest rates while rates go down. Before fixing your home loan, check our RBA page for predictions of how interest rates are likely to change and talk to a mortgage broker also. Exiting a fixed rate home loan can also be a problem due to the high exit fees they carry, so you should be sure that that type of mortgage is suited to you before signing up for it.
FAQ about one year fixed home loans
How do I know it’s a good time to fix?
You should check for predictions of interest rates from experts including financial planners and mortgage brokers and fix if you think rates are likely to go up. You should also be comfortable with keeping your property for the entire fixed period to avoid high exit fees. Consider what you would do if rates were to drop by up to 1% during the fixed term and ensure you’d be comfortable keeping your home loan.
What is a split rate solution?
This allows you to split the interest repayments on your home loan, allowing for one portion to be fixed and the other variable. This way you get some of the benefits of each.