Fixed or Variable Home Loans
The basic interest rate on a home loan is known as the standard variable rate. The rate is calculated using the interest rate set by the Reserve Bank of Australia, which changes according to economic criteria set by the Bank.
As the name suggests a variable rate loan may go up or down during the term of the loan. This type of loan can give you flexibility on your repayments and redraw facility. Many lenders also offer loans at a fixed interest rate. This means that your interest rate does not change for a given period of time –usually from one to five years. The certainty of a fixed rate can help with managing repayments
and budgeting in the first few years of having a home loan – its good protection against the unexpected, giving peace of mind.
As a rule of thumb, if a rise in interest rates of more than 2% would mean that you couldn’t cope, then it might be a good idea to fix at least a portion of your loan. Usually you cannot make extra repayments or vary repayments with a fixed rate loan. These loans also carry penalties if you cancel the loan. You may however make unlimited extra repayments without penalties on a variable.
The basic interest rate on a home loan is known as the standard variable rate. The rate is calculated using the interest rate set by the Reserve Bank of Australia, which changes according to economic criteria set by the Bank.
As the name suggests a variable rate loan may go up or down during the term of the loan. This type of loan can give you flexibility on your repayments and redraw facility. Many lenders also offer loans at a fixed interest rate. This means that your interest rate does not change for a given period of time –usually from one to five years. The certainty of a fixed rate can help with managing repayments
and budgeting in the first few years of having a home loan – its good protection against the unexpected, giving peace of mind.
As a rule of thumb, if a rise in interest rates of more than 2% would mean that you couldn’t cope, then it might be a good idea to fix at least a portion of your loan. Usually you cannot make extra repayments or vary repayments with a fixed rate loan. These loans also carry penalties if you cancel the loan. You may however make unlimited extra repayments without penalties on a variable.