Fixed Interest Rate Home Loans
With world finance markets in turmoil, now might be the time to lock in your mortgage interest rate.
Fixed loans have their interest rate locked in for a fixed length of time. At this time in Australia, you can fix your loan for periods from 1-15 years. The longer the fixed period the higher the interest rate. Fixing a loan is a bit of a gamble because the borrower is taking a "punt" on the direction of interest rates.
There are several disadvantages for fixed rate loans. Firstly: If you wish to repay the loan before the end of the fixed term, there is usually a substantial penalty to pay. Secondly: Most lenders will not allow you to do redraws. Thirdly: Most lenders will not allow you to pay off more than $5-10K extra per annum.
If the rate goes up, you're in front, but if rates drop then you have lost. However if the thought of interest rates rising keeps you awake at night, then fixed rates might be for you.