Fixed Rate Home Loans- The good, bad and the ugly

Fixed rate home loans have long offered borrowers long term piece of mind when it comes to mortgage repayments. With rates locked in for 1,2,3 or even 5 years, they definitely have their place in today’s uncertain economic climate.

What’s not known about fixed rate home loans are the hefty break cost fees applicable should the property be sold, refinanced or altered during that term.

Below we highlight some common misconceptions and tips to help you borrow better and never be caught short when considering if a fixed rate home loan is right for you.

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• A fixed rate is, by its very nature fixed, and will not decrease if variable rates do
• Significant break costs may apply if the fixed rate home loan is discharged early
• Break costs may be payable on a partial lump sum repayment during the fixed rate term
• A redraw facility or an offset account may not be available on a fixed rate loan
• A fixed rate home loan is not an appropriate option if you intend to or forsee that you may have to discharge the loan early for any reason
• Fixed rates on offer may increase (or decrease) during the period from the loan application to settlement of the loan, and that the fixed rate applicable to the loan will be the one applying at the time the loan was settled, most lenders offer a ‘lock in’ option at a nominal fee to alleviate this
• Extra repayments may not be possible or may be limited to a fixed amount per year
• Where a rate lock or lock in option is available, the borrower may wish to consider locking in the indicative fixed rate, the cost of the facility, the rate lock expiry date and its purpose

Fixed rate home loans are here to stay, working out if they suit you best is a decision that’s ultimately up to you and highly worth discussing with your local mortgage broker.