11 March 2016
Homeowners have regularly grappled with whether to go with a fixed or variable rate home loan as they try to save money and pay off their home loan as quickly as possible.
With interest rates continuing to stay low, fixed rate home loans have come to the attention of homeowners with some very competitive rates.
For example, BankSA has recently launched a very competitive promotional three-year fixed rate of 4.05% which can result in significant savings (conditions apply).
Another obvious benefit to fixing your home loan is the certainty that it provides to help with your household budgeting and planning ahead.
Locking in a rate will provide you protection against a future rate rises. Your ongoing repayments will stay exactly the same for the term of the loan – typically between one to five years – regardless of any variable interest rate fluctuations during that time.
However, the great unknown when weighing up whether to fix or not is whether the variable rate will rise or fall in the future. This is something that no one can ever predict with absolute certainty, so you need to consider the best option for your situation under a variety of circumstances.
Many people also decide to split their home loan between fixed and variable portions, which is another option worth considering.
The right loan will depend on your current situation and future plans. Always, seek professional advice to ensure you choose the best home loan for you.