Five Year Fixed Interest Rate Home Loans
Fixed interest rate home loans offers you a fixed interest rate so you have a fixed repayment amount over a set term, usually between 6 months and 10 years. The most commonly used fixed interest rate term in Australia is 3 years.
A fixed interest rate home loan is set by your lender; they borrow money from the wholesale money markets and then sells’ this on to you. The cost to the lender of borrowing this money is determined by what the money markets believe interest rates will do over a set term. Your lender will then add a margin to this, the final interest rate is then offered to you for the fixed term you are applying for.
Fixed interest rate home loans Pros
- You will know how much your loan repayments will be for a fixed period, regardless of market interest rate changes
- Protects you against interest rate rises
- You can pick the time period to suit you; fixed terms are available from 6 months to 10 years
Fixed interest rate home loans Cons
- May be less flexible than a variable home loan rate, limiting additional repayment options and excluding the option to redraw
- If your circumstances change and you want and/or need to exit the loan early, early exit fees will apply
- Over the term of your loan you may end up paying more than if you had selected a variable home loan, even in a rising interest rate market