Comparison of Fixed and Variable Home Loan Interest Rates

We all know that a home loan with a great interest rate can be very beneficial for us. If we have to pay the lower interest rate on our home loan then it can save you a lot of money. You will find different types of home loan interest rates on many home loans in Australia. You should compare them before going for any interest rates. Through this article, we will try to know which variable home loan rates are affordable for you. This will also let you know whether you should go for a fixed rate mortgage or not.

Fixed Home Loan Interest Rates

You can also call a fixed rate mortgage predictive. It is often found that in fixed-term deposits your lender will look at the cost of holding money at a certain rate for a certain amount of time. And then they subsequently determine the interest rate accordingly.

In simple words, if we understand, then if a lender feels that the case rate will be high, the fixed-rate during that time is usually more than the variable rate. Conversely, if the lender feels that the cash rate will fall in the future, then its fixed interest rate remains lower than the current variable rates.

For example, you can understand that if today a one-time borrower fixes their loan with a five-year fixed-rate mortgage loan which is 2% higher than the variable rate. Then that borrower will have to pay 2% extra interest right away.

Pros Of Fixed Rate Mortgage

  • On fixed-rate interest rate home loan, even if there is an increase in the official interest rate. Then there will be no change in your repayment.
  • Such home loan interest rates provide peace of mind to all borrowers concerned about rate rises.
  • This fixed-term deposit also allows the borrower to more precise budgeting.

Cons Of Fixed Rate Mortgage

  • If any changes happen in interest rates, then repayments do not fall.
  • The fixed-rate mortgage allows only limited additional payments.
  • It also penalizes the early payout of the loan.

Short Comparison Of Fixed Rate Home Loan Rates

  • UHomeLoan offers 1.79% interest p.a. with a $2069 first month repayment.
  • Well Home Loan offers 2.27% interest p.a. with $2186 first month repayment.
  • Own Home Loan offers 2.34% interest p.a. with $2203 first month repayment.
  • Newcastle Permanent offers 2.54% interest p.a. with $2253 first month repayment.
  • BOQ offers 2.59% interest p.a. with $2266 first month repayment.
  • IMB Bank offers 2.78% interest p.a. with $2337 first month repayment.

Variable Home Loan Rates

The variable home loan rates of a lender in Australia fluctuate approximately in parallel with the reserve bank of Australia’s cash rate. Variable home loan rates are a reflection of the current economic climate. The reserve bank of Australia uses the cash rate as a blunt instrument to control inflation.

Whenever inflation increases in Australia, the cash rate also goes up. And whenever the economy of this country weakens a bit, then there is also a decline in the cash rates.

Short Comparison Of Variable Rate Home Loan Rates

  • UHomeLoan offers 2.09% interest p.a. with a $2141 first month repayment.
  • Well Home Loan offers 1.82% interest p.a. with $2076 first month repayment.
  • Own Home Loan offers 1.99% interest p.a. with $2117 first month repayment.
  • Newcastle Permanent offers 2.22% interest p.a. with $2173 first month repayment.
  • BOQ offers 1.98% interest p.a. with $2114 first month repayment.
  • IMB Bank offers 2.19% interest p.a. with a $2166 first month repayment.

Difference Between Fixed Rate Mortgage And Variable Home Loan Rates

None of us can make an accurate guess as to how the economy of the country will be in the future. We also do not know if there is any change in the future, then how will it affect the interest rates of home loans. Therefore, through this article, we have told you all the pros and cons of a fixed-rate mortgage. We have also told you about variable home loans and what is the process. You can choose either of the two based on your research.

Variable home loans rates tend to be more flexible as compared to fixed-rate mortgages. In this, you also get to see many features, as well as facility, ability to make extra payments. You do not get the option of so many features in fixed-rate home loans. But fixed-rate home loans have predictable repayment amounts over the fixed term. But on the contrary, you do not get this in variable home loans rates.

Also remember, if you get out of a fixed-rate mortgage, you will usually be charged significant extra costs.