Get the Best Fixed Rate Loan
When Are Fixed Rate Loans a Good Idea?
The problem most Australians face when it comes to fixed rate loans is that they sign a contract for such loans when interest rates are already high, and still climbing. The problem is that the economy is cyclical and what goes up must come down. However, once they’ve locked themselves into fixed rates loans, there isn’t much that they can do when the interest rates start dropping, except to refinance their loans. The problem is that refinancing home loans can incur significant costs and can be quite complicated, which is why you need to make sure that you opt for a fixed rate loan only when the time is right.
Featured 2 Year Fixed Rate Home Loans
Apply for a Loans.com.au Dream Loan Express Fixed- 2 years Home Loan and get a low variable interest rate, plus no application fee, no valuation and no additional repayment fee. Offer ends 30 November 2011
- Interest Rate of 5.68%
- Comparison Rate of 6.07%
- Application Fee of $0
- Maximum LVR With LMI: 80%
- Minimum Borrowing: $50,000
- Maximum Borrowing: $750,000
Featured Fixed Rate Home Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
 State Custodians Mortgage Company Standard Fixed Home Loan – 3 Year Fixed Rate (Fix less than 50%) |
A competitive low rate guaranteed to help you save on repayments. | 5.80% | 6.31% | $0 / $345 | 95% | $150,000 / $1,000,000 |
 
|
 HomeStar Fixed Rate Loan – 3 Year Fixed Rate |
Keep your repayments on track with this competitive fixed rate loan. | 6.05% | 6.22% | $0 / $0 | 95% | $150,000 / $2,000,000 |
|
 St.George Fixed Rate Home Loan – 3 Year Fixed Rate |
One of the best fixed rates available. | 6.44% | 7.29% | $600 / $10 | 95% | $10,000 / $1,000,000 |
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 NAB Tailored Fixed Rate Home Loan – 5 Year Fixed Rate |
Enjoy certainty in your repayments with NAB. | 6.84% | 7.05% | $600 / $8 | 95% | $20,000 / $1,000,000 |
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Generally, when the economy is running well, you will find that home loan interest rates tend to be stable and quite low, which is the moment you want to start shopping around for fixed rate loans. When rates are extremely volatile and climbing steadily, you should avoid fixed rates loans because things will turn around and rates will drop but you will be locked into a highly expensive contract. Remember that anything can happen in three or five years – the average duration of personal loans – let alone what can happen in 25 years, which is the average timeframe for home loans.
Should I Even Consider Fixed Rates Loans?
Unlike variable rate loans, fixed rate loans can be extremely expensive to pay off early. After all, you are basically signing a fixed contract, which tends to be quite expensive to get out of. When you try to close out fixed rates loans, you will find that the exit fees are incredibly high and, in some cases, you can’t even make higher repayments to pay the loan off faster.
There are some situations in which you should avoid a fixed rate loans, including if you are intending to sell you property at some stage, if you intend to make a large repayment towards your loans, or if you are planning to shop around for other home loans to finance the one you are currently applying for.
Rate Lock: Paying a Fee to Secure Fixed Rate Loans
There are situations in which borrowers apply for fixed rates loans but the lender then changes their fixed rates before the application is approved and the loans are advanced. In this case, the applicants will receive their home loans at the new rates, rather than the rate they were expecting. However, there is a way to by-pass this issue, by paying a fee, which starts at $395 and can go up to 0.15% of the loan amount to ensure that you get the rate that was applicable when you applied for the loan.
You need to be aware of the fact that rate locks are only valid for 90 days, at most, depending on the lender of course. You also won’t be able to lock a rate during the pre-approval process.
What Are Flexible Fixed Rates Loans?
Rates are shooting into the stratosphere and you have no idea what you should do. You know, logically, that those rates are going to come down and if you opt for fixed rates loans, you will eventually want to scratch your own eyes out when rates drop, because they will eventually. At the same time you don’t want to have your heart frozen in your chest, worrying about the next rate rise that the reserve bank will announce. You’re basically stuck between a rock and a hard place, also known as the “to fix or not fix” place.
The good news is that you have options, thanks to the high level of competition on the market and consumer demand. Lenders are now offering flexible fixed rate loans, especially when it comes to home loans. With these types of home loans you can expect the following:
- the ability to make additional repayments without incurring any penalties;
- full offset facilities;
- account maintenance fees that are quite low or even non-existent;
- repayments that consist of only interest;
- redraw facilities, and more.
While these are great facilities that usually mean you can refinance for a lower cost if rates drop, you still need to remember that you are committing for the long-term.
Alternative Options
Lenders also offer alternative options, such as fixed rate loans for a limited timeframe, which then convert to variable rate home loans. For example, you can get loans with fixed rates for 3 years, 5 years, ten years and fifteen years. The latter is the maximum timeframe available to Australian consumers when it comes to fixed rate loans.
If you sign a contract for a fixed rate loan between three and five years, it is usually sufficient time to cover yourself from rising rates but not so long that you are locked into a contract that will hurt you once rates start dropping.
Ten year fixed rates loans are used when the economy is in full swing and rates are low, allowing borrowers to lock in the great rates for the long term on their home loans. However, the problem is that these types of loans don’t allow for additional repayments, which is why many borrowers opt for two loans, one variable rate loan and fixed rates loans.
Unfortunately, Australians don’t have access to longer term fixed rate loans, spanning 20 or 30 years. However, with the help of an experienced mortgage brokers, you can get the same benefits thirty year fixed rate loans can offer, but a little clever planning is involved.
Getting the Best Fixed Rate Loans: Shop Around
If you decide that the best option is to go with fixed rates loans, then you need to shop around. Out of habit, most people apply for loans with their current bank, without shopping around to see what other options are available. This is a mistake because fixed rate loans differed significantly from one lender to another, unlike variable rates, which is why you need your research before you sign on the dotted line. Remember to look at fees and penalties as well, when you are comparing different home loans.
There are times when fixed rate loans are the best options, especially when rates are low. However, there are items when signing on for fixed rates loans is a bad idea, especially if you are doing it in a panic because interest rates are climbing. Finding the best solution is often a matter of consulting a professional mortgage broke that is independent and will offer you the best possible advice to make sure you are saving as much money as possible on all your loans.
Related posts:
- 30 Year Fixed Rate Home Loan
- 15 Year Fixed Rate Home Loan
- ANZ Three Year Fixed Rate Home Loan
- 10 year fixed rate home loan
- ANZ Fixed Rate Home Loan (1 Year)
- IMB Fixed Rate Home Loan
- Home Loan – 20 to 30 Year Fixed Rate
- Commonwealth Bank Interest In Advance Fixed Rate Investment Home Loan
- Westpac Fixed Rate Investment Property Loan
- How to Decide Whether to Break a Fixed Rate Loan
Top Home Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
 Loans.com.au - Dream Catcher | A home loan offer with a $0 application fee and one of the lowest available home loan interest rates. | 5.85% | 6.21% | $0 / $375 | 80% | $50,000 / $750,000 |
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 Bankwest Online Home Loan | A low interest rate home loan with a $0 application fee and ongoing maintenance fees. This offer is exclusively available by applying online. | 5.97% | 5.97% | $0 / $0 | 80% | $100,000 / $1,000,000 |
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 Illawarra Home Loans Bank Beater Home Loan | A low variable rate, beaten down even further by 0.05% p.a. after 5 years. | 6.07% | 6.35% | $0 / $345 | 90% | $250,000 / $1,000,000 |
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State Custodians Mortgage Company Standard Variable Offset Loan | Awarded the 2011 Non bank Lender of the Year this feature-packed loan rewards customers with a bonus rate drop of 0.25% after 5 years. | 6.02% | 6.23% | $0 / $345 | 95% | $150,000 / $1,000,000 |
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