Fixed interest rates
With a fixed-rate home loan, the interest rate you pay on the loan is fixed for a period of time. This can be anywhere from six months to five years, and at the end of the time period you’ve chosen, you’ll need to fix it for a set period again.
Floating interest rates
A floating rate loan doesn’t require you to fix a particular interest rate. The interest rate you pay depends on what the Official Cash Rate (OCR) is currently in the market. Your repayments can go down, but they can also go up.
A mix of fixed and floating interest rates
There are benefits and disadvantages to both types of interest rate loans, but you can make the most of each by creating a loan that has some parts fixed and some parts floating. This way you can make extra payments into the floating portion and lock in a great rate for a period of time on the fixed portion.
The market interest rates will likely have changed since you first set up your mortgage, so when you re-fix, it may mean that you end up paying more. That’s why it’s important to know that you can use another mortgage provider if you choose to once you’ve ended your term period with your current provider.
Thinking about changing the structure of your mortgage?
Get in touch with one of our expert mortgage advisers today – we can recommend the best provider for your situation and get you the best interest rates available. Our service is free of charge so what are you waiting for?
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