Is a fixed interest rate home loan best for you?: Q&A

Fixing your home loan rate - what does it mean?

When you’re applying for a home loan there are a few different options for you to choose from. For example, the type of repayment you make (principal and interest or interest only), and the type of rate you have (fixed or variable).

Why choose a fixed rate?

A fixed rate home loan has the interest rate locked in for a specified time, usually between 1 – 5 years. By locking in the interest rate for a set period of time (eg. 2 years), it means your interest rate will remain the same regardless of whether the RBA or your bank increases or decreases interest rates during that period of time. By having an interest rate that remains the same for a set period of time, it means your repayments won’t fluctuate, they will remain the same. Certainty of loan repayments will help when it comes to budgeting. It’s important to remember that once you’ve locked in a rate, you can’t change it easily for the specified term - 1 to 5 years. (This is different to a variable rate that can change right from the start of your home loan.)

Should I consider fixing my home loan rate?

Before deciding whether or not to fix your rate, it’s important to first understand the pros and cons of fixing so you can decide whether it’s the right move for you.

Pros

• Fixing your home loan rate means that you’re securing that interest rate for a fixed period of time.

• When fixed interest rates are lower than variable rates, fixing your home loan rate might be appealing.

• This means not only will you be able to budget more effectively because you know exactly what your repayments will be, but also if you secure a low fixed rate before a potential fixed or variable rate rise, you can potentially save money on your repayments.

Cons

• Fixed loans have less flexibility, and can include large break costs if you break your contract before the fixed period ends.

• Reasons you might need to break your fixed loan can include variable rates decreasing below your fixed rate and you want to take advantage of a lower variable rate, selling your home, refinancing or paying off your home loan early. So it’s important to have a reasonable idea of whether you might need to break your loan during the fixed period before you lock it in.

At the end of your fixed period, you will have the option to re-fix your home loan or roll over to a variable rate. Regardless of whether you decide to refix or roll over to a variable rate, you will need to check what interest rates are available at the time. The reason is that both fixed and variable rates will have potentially changed during your fixed period.

Likewise, if paying your home loan off quickly is a priority to you, a fixed loan may not be right for you either. Because with a fixed rate loan, you are typically capped on the amount of additional repayments you can make to reduce your loan balance, and can be charged fees if you do.

Learn more about pairing a fixed rate home loan with an offset account here.

How do I fix my home loan rate?

Select a fixed product when applying for a home loan (see Qantas Money Home Loan’s fixed rates here), or look into the loan product switching process with your bank.

Features of a Qantas Money Home Loan Fixed Rate Loan

Having said that, Qantas Money Fixed Rate Home Loans offer features that some other fixed rate loans don’t. These include an option to have up to six 100% offset accounts* attached to your home loan for $15 per month (per loan). This means you can have the security of the fixed loan, as well as the flexibility of being able to reduce your interest payments and access your savings at any time via an offset account. The ability to redraw during the fixed term, up to $20,000 in additional repayments per year with no penalties, and no lock rate fee.

How Qantas Money Home Loans can help

Once you've found the fixed rate you're after and the house you're buying, then start your application or talk to one of our home loan experts. At Qantas Money Home Loans, we understand that your home loan has to work in line with your financial situation, needs and goals.

That’s why our home loan experts are available to help you review your current situation and answer any questions you may have to see if fixing your rate is right for you.

You have to be a Qantas Frequent Flyer member to apply for a Qantas Money Home Loan. This website contains general advice only. This information has been prepared without considering your objectives, financial situation or needs. You should consider your circumstances before acting on this information.

* An offset facility can only be linked to one home loan at any one time. Linked offset facilities must be in the same customer name/number. This is general advice only. Consider the PDS and TMD and your personal circumstances before you take out this product.