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To fix or not to fix: fixed rate loans explained

Noticed that several of the big banks are offering particularly attractive fixed rate home loans? With the cash rate staying at 2.5% since August 2013, and few indicators that official interest rates will move significantly in the short-term, why consider fixing your home loan’s interest rate? We walk you through the plusses and the minuses.

The Pros

  • You make the same repayment month after month.
  • The interest rate doesn’t change for an agreed period (e.g. 1, 2, 3, 5 or even 10-15 years).
  • You get repayment certainty.
  • At the end of the fixed rate period your loan converts to the standard variable rate (which may be higher or lower).

The Cons

  • The interest rate doesn’t change during the loan period, regardless of official interest rate movements (up or down).
  • They may offer less flexibility (and fewer loan features).
  • At the end of the fixed rate period your loan will convert to the standard variable rate (which may be higher, or lower).
  • You have to pay break costs if you break the loan, plus other fees and charges.

For more information on home finance
or the home loan that’s right for you,
call Peninsula Home Loans 1300 559 084

Written by

Stephen Bonfield, the Managing Director, previously worked for one of Australia’s major home loan companies as an independent mortgage broker. Steve used this experience to set up his own mortgage broking company - a company that places customer needs at the forefront.

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