• Home loan terms and mortgage definitions

  • Fixed interest rate

    An interest rate for a home loan, set for an agreed period.

    Fixed interest rate loans offer more certainty of repayment than variable interest rate loans because the interest rate does not change for a specified period of time (usually between 1-5 years but even up to 10 years). At the expiry of the fixed rate period the interest rate generally reverts to a variable interest rate unless a further fixed rate period is agreed with the lender. 

    Repayments are set during the fixed rate period

    • This provides greater certainty over your home loan repayments.
    • Fixed interest rates are not affected by changing economic conditions and do not move up and down like variable interest rate loans, during the fixed rate period.

    Provides more certainty for people on a strict budget

    • As payments are known, you can plan your lifestyle accordingly.
    • You have a greater ability to prepare an accurate monthly budget.
    • First home buyers and investors, in particular, may appreciate the increased certainty and security.

    Repayments don’t fall if rates fall

    • Where the interest rate is fixed, while the interest rate can be lower during periods of high interest rates they can be higher during low interest rate periods.

    Less flexibility to make additional payments

    • Lenders may charge you a fee, or break costs, for making early repayments where you have a fixed interest rate loan, which can be substantial.  So if your lender charges such a fee and you wish to make additional repayments you either need to wear this additional fee or wait until the expiry of the fixed rate period.
    • If your circumstances change or you feel another loan option is more suitable, you may still have the option to switch to an alternative loan, although fees and charges, including break costs, may apply. These can be significant so it is important to check with your lender.

    To find out whether the additional security and certainty of a fixed interest rate is right for you, or learn about the RAMS Fixed Rate home loan call 13RAMS, that's 137267.