What is a fixed rate loan?
It is very difficult to predict the movement of the official interest rate. If you want to avoid stress and worry which can come with wondering where interest rates will be on the first Tuesday of next month, then you may prefer a fixed rate home loan. A fixed interest rate loan may be for you if you like a set budget. With a fixed home loan you can choose a period of time usually from one year to ten years for which your home loan interest rate will be fixed.
With a fixed interest rate you will also enjoy fixed repayments so you will always know exactly how much is due each month to make it easier to budget. Having a fixed rate and fixed repayments may suit you if you are on a tight budget and want to know upfront how much you will be paying each month or you may just be the kind of person who likes a bit of certainty in their life.
A fixed interest rate home loan does not lend you as much flexibility. Often you are unable to make additional repayments to a fixed rate home loan if you come across extra cash which you would like to apply to your loan. Also if you have to pay out the loan or if you decide to sell your home or refinance your loan with another lender, you may have to pay exorbitant exit fees.