To fix or not to fix – fixed rate vs variable rate loans
First published on January 5, 2017
With interest rates starting to rise, many buyers have begun wondering whether it’s time to lock in a fixed interest rate or stay with a variable rate. There is no right or wrong answer, and both options have their pros and cons.
Variable interest rates are generally lower than fixed (although MyState’s 2 and 3 fixed rates are currently lower than the variable) and allows borrowers to make extra repayments. This can reduce the amount of money owed over the life of your home loan. However, variable rates fluctuate as the market changes. While rates have dropped to their lowest levels in decades, the tide is already starting to turn and interest rates have started to head back up.
As the name suggests, a fixed interest rate locks in a set rate for up to five years. This means that, even if the market changes, your repayments will stay the same. On the downside, there are often costs involved if you want to sell or switch during the fixed term.
Some borrowers choose to hedge their bets and split their home loan rate. In this scenario, they lock in a portion of the loan with a fixed interest rate and the other portion with a variable rate.
If you would like to talk to a MyState lender about locking in one of our low fixed rates, call 138 001 or go to mystate.com.au
This advice does not take into account your personal objectives, financial situation or needs and you should consider whether it is appropriate for you. Please read our disclosure documentation at mystate.com.au before acquiring any product. Loan applications are subject to credit approval criteria. Terms and Conditions, Fees and Charges apply, and are subject to change. MyState Bank Limited (MyState) ABN 89 067 729 195 AFSL 240896 Australian Credit Licence Number 240896