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 Yvonne Taylor   |   Updated 26th March 2020

Comparing 3 fixed rate home loans for $450,000.00 over 30 years.
Citi Fixed Rates with Mortgage Plus

Citi Fixed Rates with Mortgage Plus

Interest rate (p.a.)

2.89%

Comp rate^ (p.a.)

3.55%

Max LVR

90.00 %

Application fee

$0.00

Ongoing fees

$0.00 p.a.

Total repayment

$673,425.40

$1,870.63

Monthly repayment

Highlights

Citi Fixed Rates with Mortgage Plus

St.George Fixed Rate Home Loan

St.George Fixed Rate Home Loan

Interest rate (p.a.)

2.99%

Comp rate^ (p.a.)

4.49%

Max LVR

60.00 %

Application fee

$0.00

Ongoing fees

$0.00 p.a.

Total repayment

$682,125.14

$1,894.79

Monthly repayment

Highlights

St.George Fixed Rate Home Loan

Bankwest Fixed Rate Home Loan

Bankwest Fixed Rate Home Loan

Interest rate (p.a.)

3.69%

Comp rate^ (p.a.)

4.70%

Max LVR

90.00 %

Application fee

$0.00

Ongoing fees

$0.00 p.a.

Total repayment

$744,742.45

$2,068.73

Monthly repayment

Highlights

Bankwest Fixed Rate Home Loan

Q&As

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 may be between one and five years.

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 happens at the end of the specified fixed rate period?

At the end of the fixed rate period specified in the loan agreement, the interest rate will usually revert to a variable rate. Depending on how the lender’s interest rates have changed during the fixed rate period (possibly in reaction to changes in the official cash rate set by the Reserve Bank of Australia), the new variable rate (usually the lender’s standard variable rate) may be either higher or lower than the fixed rate previously charged. You may be able to negotiate the variable 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 are the advantages of a fixed rate home loan?

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.

Also, in a market where interest rates generally are rising, a further advantage may be that the fixed rate you are paying will 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).

What are the disadvantages of a fixed rate home loan?

If you have a fixed rate loan you may not be allowed to make extra repayments 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).

An additional disadvantage, in a market where interest rates generally are falling, is that the fixed rate you are paying may at some point be higher than the variable interest rates being offered for new or refinanced loans.

Fixed rate home loans may also incur high exit fees if you decide that you want to refinance the loan, for example if interest rates fall drastically and you want to negotiate a lower rate. As well as this, a fixed rate home loan is less likely to be offered with redraw facilities (if you need access to some extra cash) or with a full 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).

Are there any early exit fees on fixed rate home loans?

Possibly. Early exit or break fees on variable 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 is a split rate home loan?

A split rate home loan combines both fixed and variable interest rates. For example, if the total loan amount is $600,000, the lender may offer $200,000 at a fixed interest rate and the remainder (which begins at exactly $400,000 but gradually declines as you make repayments) at a variable interest rate.

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