Fixed Rates - Risks and Benefits
Fixed Interest Rate Home Loans have a set period of time - often 1, 2, 3 or 5 years. Interest rate rises will not affect you during the fixed rate term, however, you will not benefit from a drop in interest rates if this occurs during the fixed rate period. At the end of the fixed rate term, the loan will usually switch to the standard variable rate which may be higher than the fixed rate. Fixed Rate Loans can make budgeting easier - knowing exactly what your repayments will be.
Additional loan repayments are often not allowed with fixed rate loans or repayments may be capped at a low amount or only permitted with a fee. Any redraw or offset facility may also not be offered on a fixed rate loan. Fixed rate loans may have a break fee if you change or pay off your loan within the fixed rate period
Makes budgeting easier as you know what your repayments will be.
Fewer loan features could cost you less.
You won't get the benefit if interest rates go down.
It may cost more to switch loans later, if you're charged a break fee