What's the difference between Fixed and Variable home loans?

Fixed Interest rate: A fixed rate will mean that the interest you pay remains the same for a set period, usually between 1-5 years. Fixing your rate means it will remain the same, regardless of any changes to the official cash rate set by the RBA or market fluctuations.

In essence – Your monthly repayments will be reliable, they’ll stay unchanged for the fixed period, and provide you with certainty and stability. However.. If the interest rates decrease, then you’ll be stuck paying more and refinancing may mean you’re charged a break fee.‍

Variable Interest rate: Having a variable interest rate means that the interest you pay can fluctuate month to month, depending on the official cash rate set by the RBA, and market fluctuations. It essentially means you don’t have the stability of knowing how much you’ll be paying each month, but it also gives you the opportunity to pay off your loan sooner if the rate falls.

There are pros and cons with both rate types. Variable rates have historically actually been cheaper than fixed rates. It is difficult to “pick the perfect time” to fix your interest rates and fixed rates are stricter on what you can and cannot do. For example if you break your fixed rate mid term, you can be charged break costs.

Whereas a variable rate means you can pay it down and pay it out without penalty at any time you like. You can also refinance at any time or sell your property to upgrade.

It is important to speak to us about what the current market expectations are and what the future outlook is likely to do. Fixing at the wrong time can be a very costly mistake!