A fixed-rate home loan locks your home-loan repayments into an unchangeable interest rate for a certain period of time.

When choosing a home loan, borrowers are often stuck in deciding whether to take a fixed-rate or a variable-rate product. While both have their advantages, this guide will help you explore the benefits of a fixed-rate loan.

What is a fixed-rate home loan? 

A fixed-rate home loan locks your home-loan repayments into an unchangeable interest rate for a certain period of time. Home loans can be in a fixed-rate period for one, three, or five years. Some lenders even offer fixed-rate terms of more than five years.

When you decide to apply for a fixed-rate home loan, your lender will most likely offer you a rate lock. This means that the rate being offered with your loan will be fixed from the point of application to the end of your fixed-rate contract.

After the fixed term ends your rate will revert to the standard variable rate, unless you decide to enter another fixed-rate loan contract.

Benefits of fixed-rate home loans

A fixed-rate home loan is neither for everybody nor a one-size-fits-all solution for your home-loan needs, but it sure does have its own share of benefits.

Fixed-rate home loans provide certainty.

Depending on how you look at it, having a fixed monthly repayment is beneficial, especially if you are a type of person who prefers certainty. Having a fixed-rate home loan will allow you to organize your budget and stay on top of your repayments more easily because you know exactly how much you will be paying weekly, fortnightly or monthly. You will be paying the same amount until the time comes that your loan reverts to a variable interest rate. At that time, you have the option to re-fix your loan, allowing you to take advantage of your lender's new fixed rate. Otherwise, your loan converts to a variable-rate loan.

Fixed-rate home loans allow you to budget more seamlessly.

A fixed-rate home loan is perfect for first-home buyers who have a strict budget, particularly those who are still settling other upfront expenses like moving costs and renovation.

Fixed rates protect you from sudden rate increases.

When the housing market is on a boom and wages are on the rise, it is more likely for the Reserve Bank of Australia to raise the official cash rate, prompting lenders to follow suit and raise their lending costs.

There are other instances, however, when lenders make out-of-cycle hikes, especially when they are facing funding pressures.

In such a scenario, having a fixed-rate home loan will let you breathe a sigh of relief. Should interest rates rise, you will remain unaffected. It is very practical to apply for a home loan when the lending environment is in a low-interest scenario. This way, you take advantage of a low interest rate even if rates suddenly rise.

Fixed-rate home loans allows you to save big.

Having a fixed-rate home loan gives you the chance to save for a rainy day. With a fixed interest rate, you are not subject to any hikes, allowing you to save and allot your money for other expenses.

As mentioned earlier, you can easily manage your finances given your fixed monthly repayments, allowing you to plan for any other future purchases without damaging your budget.

A word of caution about fixed-rate home loans…

As a rule of thumb, you have to do some research first if you want to experience the full advantage of having a fixed-rate home loan.

One of the things you have to consider is the direction of the market. Usually, when banks are expecting future cash-rate cuts by the central bank, fixed-rate offerings are more discounted than the variable rate. Fixed-rate loans are more expensive when banks are anticipating a rate hike.

The circumstances change when the official cash rate remains low while banks are making out-of-cycle hikes. In this case, it is best to consider seeking out the help of a mortgage broker to know your options.

Fixed-rate home loans also have their own setbacks. There is certainly less flexibility when you avail of a fixed-rate mortgage product.

Since such loans are not affected by market movements, your repayments might get stuck at a higher rate than industry average when interest rates fall.

Some lenders also offer fewer features with fixed-rate home loans. Some do not offer offset accounts, while others charge extra when having a redraw facility.

Lastly, fixed-rate home loans typically charge higher exit and switching fees, making it a struggle to refinance your loans.

Find the best fixed rate home loans

Your Mortgage helps you compare the best fixed rate home loans available in the market today. Use our table below or go to our fixed rate home loans page to know more.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
5.59% p.a.
6.25% p.a.
$2,294
Principal & Interest
Fixed
$0
$900
60%
5.59% p.a.
5.85% p.a.
$2,294
Principal & Interest
Fixed
$0
$600
95%
5.69% p.a.
6.37% p.a.
$2,319
Principal & Interest
Fixed
$350
$0
90%
5.69% p.a.
7.53% p.a.
$2,319
Principal & Interest
Fixed
$0
$400
95%
5.73% p.a.
6.77% p.a.
$2,329
Principal & Interest
Fixed
$0
$250
95%
5.78% p.a.
6.81% p.a.
$1,927
Interest-only
Fixed
$0
$250
95%
5.79% p.a.
7.79% p.a.
$2,344
Principal & Interest
Fixed
$190
$0
90%
5.79% p.a.
7.55% p.a.
$2,344
Principal & Interest
Fixed
$8
$810
95%
5.79% p.a.
6.46% p.a.
$2,344
Principal & Interest
Fixed
$0
$900
70%
5.79% p.a.
7.43% p.a.
$2,344
Principal & Interest
Fixed
$0
$195
94.99%
5.79% p.a.
7.99% p.a.
$2,344
Principal & Interest
Fixed
$8
$810
95%
5.79% p.a.
8.02% p.a.
$2,344
Principal & Interest
Fixed
$190
$0
90%
6.14% p.a.
6.15% p.a.
$2,434
Principal & Interest
Fixed
$0
$600
95%
5.79% p.a.
6.67% p.a.
$2,344
Principal & Interest
Fixed
$395
$0
95%
5.79% p.a.
6.46% p.a.
$2,344
Principal & Interest
Fixed
$350
$210
95%
5.80% p.a.
5.91% p.a.
$2,347
Principal & Interest
Fixed
$0
$0
90%
5.84% p.a.
7.20% p.a.
$2,357
Principal & Interest
Fixed
$395
$180
95%
6.59% p.a.
7.27% p.a.
$2,552
Principal & Interest
Fixed
$0
$160
90%
6.59% p.a.
6.83% p.a.
$2,552
Principal & Interest
Fixed
$8
$0
70%
6.64% p.a.
8.30% p.a.
$2,213
Interest-only
Fixed
$395
$0
80%
More home loans
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .