Fixing your interest rate not only gives you peace of mind that your interest rate will not increase for a set period of time, it also guarantees that your repayments will remain the same for the fixed period, enabling you to budget more effectively.

When the interest rates rise, it’s comforting knowing that your repayments are not affected. Of course this is a doubled edged sword – if the interest rates decrease while you are locked in, potentially you are missing out on great savings.

When the Reserve Bank of Australia (RBA) sets its official interest rate each month, they are not talking about fixed rates.Fixed and standard variable rates fluctuate for different reasons and at different times.

On the other side of the coin, a variable rate home loan gives you more freedom. Variable rates often sit slightly lower than fixed rates at any given time, however you are running the risk of rate increases which will impact your wallet.

The benefits of a variable rate are that it places you in an advantageous situation should your rate decrease while you have a variable mortgage. There is also the freedom to make unlimited extra repayments (please note that you can also make extra repayments with fixed as well – depending on the product type) and further loan discounts available from various lenders should you qualify.

So which is the better option? It’s impossible to say with certainty whether going fixed or variable will be the best option for you. That is because everyone has a different level of income, different financial goals and some require various levels of financial advice.

Another option to consider is having both! Do you know that you can fix a portion of your loan and leave the rest variable? The variable portion will benefit from rate decreases and the fixed will benefit if the rates increase.

Choosing the right type of loan and lender is important. The Finance Pad will do all your research and help in choosing the best suited product for you, whether you are looking at refinancing, purchasing or releasing equity.