Fixed interest rate mortgage loans

Benefits of fixed interest rate mortgage loans

Fixed-rate mortgage loans give Australian home buyers repayment stability by locking in an interest rate for 1-5 years. Unlike variable loans, repayments stay the same regardless of Reserve Bank rate changes, ideal for first-time buyers or those with tight budgets. Key benefits:

• Stable payments: Repayments stay consistent throughout the term.

• Budget confidence: Easier to plan ahead.

• Rate protection: Shielded from future rate rises.

When the fixed term ends, your loan reverts to the lender’s variable rate, an ideal time to review, refix or refinance.

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How to choose the best fixed-rate term

The right fixed term depends on your finances, market outlook and goals. There’s no universal “best” option, just the one that fits your situation. Key considerations:

• Market trends: Expecting rate rises? A longer fix offers protection.

• Flexibility: Shorter terms let you reassess sooner but may expose you to rate changes.

• Life plans: If you expect to sell, renovate or change jobs, a shorter fix adds freedom.

HeyNest connects you with independent mortgage brokers across Australia who compare multiple lenders to find the ideal term and rate for your goals.

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Compares and negotiates the best market rates for you.

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Standard, often non-negotiable in-house rates.

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Avoiding pitfalls of a fixed interest mortgage

Fixed-rate loans offer certainty but limit flexibility and may include costly break fees. If rates drop or you refinance early, penalties can apply. Common drawbacks:

• Extra repayment caps: Limits on how much extra you can pay yearly.

• No full offset account: Reduces potential interest savings.

• Break costs: Fees for ending the loan early can be steep.

An independent broker via HeyNest can help you compare products, explain conditions and ensure your fixed loan supports your long-term plans.

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Frequently asked questions

Can I have both a fixed and a variable rate at the same time?

Yes, this is known as a split loan. You can fix a portion of your loan and keep the rest on a variable rate for flexibility.

Are there any fees for breaking a fixed interest mortgage?

Yes, break fees (or 'economic costs') are common and can be substantial if market rates have dropped since you locked in your rate.

Is a fixed rate always lower than a variable rate?

Not necessarily. Lenders price fixed rates based on their forecast of future market movements, meaning they can be higher or lower than the current variable rate.