With a fixed rate home loan, your rate doesn't change during the fixed period. After the fixed period ends, the loan reverts to a variable rate loan. With a variable interest rate, your lender can change your interest rate at any time.
Most Australian lenders let borrowers fix their rate for a period between 1 and 5 years.
If you want to fix your rate for a longer period, check out our guides on:
Most of the time, a fixed rate loan is going to be higher than a variable rate loan - but not necessarily at the moment.
When interest rates were at record lows back in 2020 and 2021, some of the lowest interest rates on the market were 1- and 2-year fixed rate loans. Fixed rates then rose higher than variable rates as the cash rate increased in 2022 and 2023.
Now, fixed rates are falling lower than variable rates again as experts predict we have reached the 'interest rate peak'. This means that rates are unlikely to rise further and many economists predict rates will begin to fall at the end of 2024 or in 2025. As such, many banks and lenders are reducing their fixed rates to entice borrowers to fix their rate.
Comparing 1-year fixed rate home loans is no different than comparing another mortgage type.
Focus on the following:
Even if you're not fixing entirely to get the lowest rate, when comparing 1-year fixed rates you should look for a lower rate among those products. It means your repayments will be lower.
Some loans have an application fee, a settlement fee or even a monthly account fee. Some loans have almost no fees.
Obviously the less you have to pay in fees, the better.
Fixed rate loans are often less flexible than variable loans. They are less likely to have offset accounts or let you make extra repayments. But some do, so it's worth comparing.
But even if a 1-year fixed rate lacks these features, you'll be on a variable rate in 12 months. Then the loan will likely give you more repayment options.
Most lenders offer both fixed and variable rate loans across most of their product range. Owner-occupiers and investors both have plenty of options if they want to lock in a fixed rate.
While it is true that there are more options out there for variable rate borrowers, it's still possible to find more unique fixed rate products like:
No one wants to spend years and years paying off what ends up being mostly interest. Here are several tips on how to pay off your home loan faster.
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