Fixed rate home loans

A fixed rate home loan can be a good choice when you’re finding your feet with a new loan and need some budgeting certainty. Check out the available fixed rate home loans here.

By   |   Updated 16th June 2020

Comparing fixed rate home loans for $450,000 over 30 years

HSBC Exclusive 2 Year Fixed Rate Home Loan (Owner, Principal and Interest)

On HSBC's website

HSBC Exclusive 2 Year Fixed Rate Home Loan (Owner, Principal and Interest)

Interest rate (p.a.)

2.09%

Comp rate^ (p.a.)

2.98%

Max LVR

80.00 %

Application fee

$0.00

Monthly repayment

$1,683.61

Total repayment

$606,099.60

Highlights

  • A Relationship Manager to guide you through the application process.
  • The ability to make $10,000 extra repayments per year with no ongoing monthly service fees or annual fees.
  • The option to split with one of our variable home loans.

Bank promo

  • Promotional offer of 2.09% p.a.. Excludes LVR above 80%. Available on borrowings from $50,000, interest rate available as at 01 June 2020, apply by 31 July 2020, settle by 30 September 2020 and is subject to change. Reverts to HSBC's Standard Variable Rate. Maximum loan amount $7,500,000. Terms and conditions apply.
ME Flexible Home Loan with Member Package 2 years Fixed Rate (Owner, Principal and Interest) LVR >80% - 90%

On ME Bank's website

ME Flexible Home Loan with Member Package 2 years Fixed Rate (Owner, Principal and Interest) LVR >80% - 90%

Interest rate (p.a.)

2.49%

Comp rate^ (p.a.)

3.57%

Max LVR

90.00 %

Application fee

$0.00

Monthly repayment

$1,775.71

Total repayment

$639,255.60

Highlights

  • Discounted rates
  • Options for a repayment holiday
  • 100% offset account
Virgin Money Reward Me Fixed Rate Home Loan (2 years) $300K and above (Investor, Principal and Interest) LVR <80%

Virgin Money Reward Me Fixed Rate Home Loan (2 years) $300K and above (Investor, Principal and Interest) LVR <80%

Interest rate (p.a.)

2.69%

Comp rate^ (p.a.)

3.39%

Max LVR

80.00 %

Application fee

$300.00

Monthly repayment

$1,822.82

Total repayment

$656,215.20

Highlights

  • Competitive fixed rates for 1 to 5 years terms.
  • Additional repayments up to $10,000 per annum.
  • Reverts to the discounted variable rate on expiry of the fixed term.

Bank promo

  • Get a little something back with $2,500 cashback when you refinance with Virgin Money. Terms, Eligibility & Credit Criteria apply. New eligible refinance loans & companion account. Apply 18 May 2020 to 28 August 2020, settle by 30 October 2020. Min. loan amount of $300,000 and up to 80% LVR.
Reduce Home Loans Home Owners Dream Fixed - 3 Year Fixed LVR 90% (Owner, Principal and Interest)

Reduce Home Loans Home Owners Dream Fixed - 3 Year Fixed LVR 90% (Owner, Principal and Interest)

Interest rate (p.a.)

2.09%

Comp rate^ (p.a.)

2.64%

Max LVR

90.00 %

Application fee

$0.00

Monthly repayment

$1,683.61

Total repayment

$606,099.60

Highlights

  • No ongoing annual or monthly fees!
Virgin Money Reward Me Fixed Rate Home Loan (2 years) $300K and above (Owner, Principal and Interest) LVR <80%

Virgin Money Reward Me Fixed Rate Home Loan (2 years) $300K and above (Owner, Principal and Interest) LVR <80%

Interest rate (p.a.)

2.29%

Comp rate^ (p.a.)

2.91%

Max LVR

80.00 %

Application fee

$300.00

Monthly repayment

$1,729.30

Total repayment

$622,548.00

Highlights

  • Competitive fixed rates for 1 to 5 years terms.
  • Additional repayments up to $10,000 per annum.
  • Reverts to the discounted variable rate on expiry of the fixed term.

Bank promo

  • Get a little something back with $2,500 cashback when you refinance with Virgin Money. Terms, Eligibility & Credit Criteria apply. New eligible refinance loans & companion account. Apply 18 May 2020 to 28 August 2020, settle by 30 October 2020. Min. loan amount of $300,000 and up to 80% LVR.
ME Flexible Home Loan with Member Package 2 years Fixed Rate (Investor, Principal and Interest) LVR >80% - 90%

On ME Bank's website

ME Flexible Home Loan with Member Package 2 years Fixed Rate (Investor, Principal and Interest) LVR >80% - 90%

Interest rate (p.a.)

3.18%

Comp rate^ (p.a.)

3.84%

Max LVR

90.00 %

Application fee

$0.00

Monthly repayment

$1,941.18

Total repayment

$698,824.80

Highlights

  • Discounted rates
  • Options for a repayment holiday
  • 100% offset account
Virgin Money Reward Me Fixed Rate Home Loan (2 years) $300K and above (Investor, Interest Only) LVR <80%

Virgin Money Reward Me Fixed Rate Home Loan (2 years) $300K and above (Investor, Interest Only) LVR <80%

Interest rate (p.a.)

2.99%

Comp rate^ (p.a.)

3.40%

Max LVR

80.00 %

Application fee

$300.00

Monthly repayment

$1,894.79

Total repayment

$682,124.40

Highlights

  • Competitive fixed rates for 1 to 5 years terms.
  • Additional repayments up to $10,000 per annum.
  • Reverts to the discounted variable rate on expiry of the fixed term.

Bank promo

  • Get a little something back with $2,500 cashback when you refinance with Virgin Money. Terms, Eligibility & Credit Criteria apply. New eligible refinance loans & companion account. Apply 18 May 2020 to 28 August 2020, settle by 30 October 2020. Min. loan amount of $300,000 and up to 80% LVR.
ME Flexible Home Loan with Member Package 3 years Fixed Rate (Owner, Principal and Interest) LVR >80% - 90%

On ME Bank's website

ME Flexible Home Loan with Member Package 3 years Fixed Rate (Owner, Principal and Interest) LVR >80% - 90%

Interest rate (p.a.)

2.59%

Comp rate^ (p.a.)

3.54%

Max LVR

90.00 %

Application fee

$0.00

Monthly repayment

$1,799.17

Total repayment

$647,701.20

Highlights

  • Discounted rates
  • Options for a repayment holiday
  • 100% offset account
ME Flexible Home Loan with Member Package 3 years Fixed Rate (Investor, Principal and Interest) LVR >80% - 90%

On ME Bank's website

ME Flexible Home Loan with Member Package 3 years Fixed Rate (Investor, Principal and Interest) LVR >80% - 90%

Interest rate (p.a.)

3.09%

Comp rate^ (p.a.)

3.79%

Max LVR

90.00 %

Application fee

$0.00

Monthly repayment

$1,919.13

Total repayment

$690,886.80

Highlights

  • Discounted rates
  • Options for a repayment holiday
  • 100% offset account

Overview

When considering a home loan, you'll need to decide between opting for a fixed interest rate or a variable interest rate. A fixed rate home loan can be a good choice when you’re finding your feet with a new loan – especially if it's your first home loan – and need some budgeting certainty.

Compare the available fixed rate loans here at Finty.

Fixed home loan rates are usually for a short term only

You're most likely to be offered a five-year fixed home loan. Most loans which start with a fixed rate will revert to a variable rate for the remainder of the loan term after five years.

Advantages and disadvantages of a fixed rate home loan

Advantages

  • You have some certainty, making it easier to budget for repayments because the periodic repayment amount never changes.
  • You're protected from interest rate increases – if rates rise elsewhere, you might find that you are paying a rate lower than the current variable interest rate

Disadvantages

  • Some fixed rate loans don't allow you to make extra repayments to pay the loan off sooner.
  • If the lender's interest rates go down generally, you won't be able to take advantage of this because your rate is fixed.
  • Fixed rate loans may have higher fees for making extra repayments (if allowed), higher switching fees (if you want to renegotiate some of the loan's conditions) and may not have an offset account or redraw facility.
  • Most fixed rate loans are subject to a break fee if you want to pay the loan off before the end of the agreed term.

Advantages and disadvantages of a variable rate home loan

Advantages

  • Variable interest rate home loans are more likely to have a flexible repayment system, allowing the borrower to make extra repayments to pay the loan off earlier and pay lower total interest charges as a result.
  • Variable rate home loans are more likely to have a redraw facility (giving you access to any extra repayments you made if you find you need the cash for another purpose) and a linked offset account (where you can park your spare cash to reduce interest charges).
  • Refinancing a variable loan is usually easier and less expensive than refinancing a fixed rate loan.
  • Your repayments on a variable rate loan will be lower if interest rates as a whole go down.

Disadvantages

  • It's harder to budget for variable home loan repayments, because they can go up or down at any stage during the term of the loan.
  • If you are already financially stretched when you take out a variable rate home loan, you could end up in serious difficulties if interest rates increase.

Best term length for a fixed home loan

A typical term for the fixed rate period of a loan is between one and five years, even though your total loan term may be 20 or 25 years. You may, however, be able to get a fixed loan term of up to 10 years, or in a very few cases, 15 years, but you should consider very carefully (and get professional financial advice) before committing to a fixed rate for this length of time. A better option, if you are really sold on the idea of a fixed interest rate, would be to negotiate with the lender for another fixed term after the first fixed term ends.

If you've decided to start with the certainty of a fixed rate, it's probably a good idea to choose five years of fixed rates (rather than just one year, for example) to give yourself time to get used to the discipline of regular mortgage repayments. If you find you do have spare cash after meeting your repayments, you could put it into a bank deposit account to act as a buffer in case find yourself in temporary financial difficulties, or leave it in an offset account (although you're less likely to have one of these with a fixed rate loan).

Learn about fixed rate home loans

Find out about the pros and cons of fixing your home loan interest rate.

  • Pros & cons
  • Tips
  • FAQs

Budget certainty

With a fixed rate loan, the required weekly, fortnightly or monthly repayment never changes during the fixed rate period, which makes it easier to budget for the repayments.

Choice of loan terms

You can usually select a fixed rate term that suits you, between six months and ten tears, even though a typical term is five years.

Extra repayments and redraw may not be allowed

If you have a fixed rate loan you may not be allowed to make extra repayments, and withdraw them if you need to, during the fixed rate period, or if you are allowed to make extra repayments you may incur significant administration fees. (Making extra repayments if you can afford them – and if it is allowed without a fee – is generally a good idea because it means that you will pay the loan off earlier and end up paying less interest in total during the term of the loan.)

High break fees

Fixed rate home loans may incur high break fees if you decide that you want to refinance the loan, sell your house, or pay the loan off early.

No benefit from falling interest rate market

In a market where interest rates generally are falling, you won't see any benefit. The fixed rate you are paying may at some point be higher than the variable interest rates being offered for new or refinanced loans.

No offset account

Fixed rate home loans may not have a linked offset account (a bank account where you can park your spare cash and have it temporarily counted towards reducing the loan principal for the purpose of calculating interest charges).

Protection from rate increases

In a market where interest rates generally are rising, the fixed rate you are paying may at some point be lower than the variable interest rates being paid by other borrowers (although the lender may have factored in an anticipated rate rise when calculating the fixed rate it offered you).

A tiny difference in the interest rate can be very significant

A small difference in the interest rates may seem trivial, but you do in fact need to pay close attention if the interest rate is the only difference between two loans that you think will suit you.

For example, MoneySmart.gov.au's mortgage calculator says that if you had a $400,000 loan at 2.6% p.a. , your monthly loan repayments over a period of five years would total $108,900, or $1,260 more than if the interest rate were slightly lower at 2.5% p.a.

How to choose between a fixed or variable loan

When deciding between a home loan fixed rate and a variable rate, here's what to consider:

  • Is budget certainty the most important factor for you? Choose fixed.
  • Do you think interest rates will reduce significantly in the short term, and are prepared to risk that they won't? Choose variable.
  • Do you think interest rates will increase significantly in the short term, and are prepared to risk that they won't? Choose fixed.
  • Do you think rates will stay roughly the same in the short term? Choose fixed.
  • Still can't decide? Choose a split rate loan.

Just remember that lenders employ expert economists to predict likely future movements of interest rates, and build these predictions into their fixed interest rates. It's unlikely that your foresight about rates will be greater than theirs, but even experts get it wrong sometimes.

How to choose between different fixed rate home loans

Once you've decided that a fixed rate is right for you, you need to decide which particular fixed rate loan offer will suit you best. It's not necessarily the one with the lowest advertised interest rate. You'll also need to compare:

  • The comparison rate of interest, which builds in the cost of the loan's likely fees (because different lenders, and different loans from the same lender, have different fees attached)
  • All of the loan's fees (application fee, switching fee, break fee, early exit fee) because the comparison rate doesn't include every possible fee, only the unavoidable ones
  • The loans extra features, if any, such as extra repayment and redraw facilities, and an offset account
  • Whether you can borrow more with one loan rather than another, if this is an important factor for you
  • Whether there is a choice of loan terms, if you have a specific term in mind

Can the fixed interest rate change between the date the loan is approved and the date the loan actually starts?

Yes. Since quite a few weeks, or even months, may elapse between the date your loan is approved and the date it actually begins (the day you complete the legal purchase of the property), the lender may reserve the right to adjust the fixed rate before the loan starts. However, you may be able to request a ‘rate lock’ (usually in exchange for a fee) for a specified period (e.g. 90 days).

What does breaking mean when applied to a fixed home loan?

Early exit or break fees on variable interest rate home loans are banned by legislation, but a lender still has the option of charging an early exit fee on a fixed home loan if you decide you want to break the contract before the fixed rate period ends. (You would need to do this if you want to sell the property, for example.)

What happens at the end of the specified fixed rate period?

At the end of the fixed rate period specified in the loan agreement, your interest rate will usually revert to a variable rate. Depending on how the lender’s rates have changed during the fixed rate period (probably in reaction to changes in the official cash rate set by the Reserve Bank of Australia), your new rate (usually the lender’s standard variable rate) may be either higher or lower than the one you were paying previously. You may be able to negotiate the new rate downwards if the rate first proposed by the lender seems too high.

Another possibility is that you may be able to fix the interest rate for a further term with your current lender, if that suits you.

What is a fixed rate home loan?

A fixed rate home loan has interest charges on the loan principal calculated at a set rate agreed when the loan begins. The interest rate never changes during a specified period, which will usually be between one year and five years.

What is a split rate home loan?

A split rate home loan combines both fixed and variable rates. For example, if the total loan amount is $400,000, the lender may offer $100,000 at a fixed interest rate and the remainder (which begins at exactly $300,000 but gradually declines as you make repayments) at a variable interest rate.

Split rate loans are for borrowers who are unsure whether a totally fixed rate would be best for them. It allows them to hedge their bets.

What is the lowest fixed rate for a home loan?

Although a rate may be fixed once your loan starts, the reality is that the fixed rate being offered to new lenders is constantly changing. Lenders try to predict short and medium-term changes in the Reserve Bank's official cash rate when setting their fixed rates, so when the official cash rate changes, fixed rates for new borrowers are likely to change as well.

This makes it difficult to say what the lowest fixed term rate is, without the information becoming immediately out-of-date. At the time of writing, the lowest fixed rates available were 2.2% p.a. for a two-year term. Finty aims to list the lowest available rates on this page, while emphasising that the lowest advertised rate is not necessarily the best deal for you. You also need to look at the comparison rate and the loan's other features.

When is a fixed rate not the best choice?

A fixed rate loan is not a good idea if:

  • You want to make large extra loan repayments (because you may not be allowed to do this, or may have to pay an extra fee)
  • You want to be able to use an offset account to reduce interest charges (because fixed rate loans often don't have a linked offset account)
  • You think you may need to sell your home during the fixed term (because you'll incur a break fee)
  • You think you may want to refinance during the fixed term (because you'll incur a break fee)

Will I get a better fixed rate if I have a good credit score?

Absolutely. Lenders will automatically offer lower rates to borrowers perceived as less risky (and having a good credit score helps to put you in that category), and you can use your good credit score to negotiate rates down even further.

Will I get a better fixed rate or a longer fixed term if I have a bigger deposit?

Having a bigger deposit puts you in a better negotiating position, regardless of what type of interest rate you're choosing. With a 20% deposit means you should be able to avoid paying Lender's Mortgage Insurance (LMI), and get a competitive interest rate. Having a deposit of even more than 20% puts you in a definitely less risky category from the lender's viewpoint, and you should be able to negotiate a truly competitive rate if all your other financial factors (income, total debt, credit score) are sound.

Having a bigger deposit may help if you want to negotiate a longer fixed term, but it will probably not have a major impact on this feature of your loan.

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