Fixed Rate Home Loans Australia


Fixed Rate Home Loans Australia:

Fixed rate home loans Australia is most popular home loan offer from bank and finance companies in Australia at present. Fixed rate home loans with fixed monthly repayments can give client flexibility to manage their budget and also save huge amount of money on interest. Bank and non bank finance companies are offering 1 year to 10 years fixed rate home loans. As usual, longer the client would like to fixed their interest rate, the higher interest rate they pay. Bank special interest rate offers, 1 yearfixed rate, introductory home loan rate, 6 months introductory rate this are basically lowest interest offers from banks. In most cases client save some amount of money in short term but loos a huge amount inlong term with some of this offers from some companies. To understand the benefits of fixed rate home loans in Australia we have given step bystep questions bellow:

RBA Cash rate changes in past 5 years:

Fixed rate home loans australia
What is best fixed rate home loan ?

Bank offer very lower rate on introductory interest rate to sign up new clients to their home loans. But if client does not have any historical record about their usual interest rates, that means they are signing up for something very expensive without any prior knowledge.

To select the best fixed rate home loan, we need to understand the current market situation in term of reserve bank cash rate. If the cash rate is at usual state, or lower than usual state, it means it is risk free to take a fixed rate home loan. Some times when the cash rate remains too low, at that period of time variable rates from banks become lower than previous years fixed rate, or a fixed rate from year before. As a result it is lower in risk factors to take home loan at maximum of 3 years fixed rate. In most cases difference between total savings in 3 years on interest from a 3 years fixed rate home loan with total savings on interest from a 5 years fixed rate home loan is insignificant.

Considering above it is lower in risk to have maximum 3 years fixed rate home loan to have best benefit on interest. And it is better not to have a fixed rate home loan when cash rate is at pick stage and it is obvious the cash rate will be reduced by next year or so.

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What portion of home loan should be on 3 years fixed rate home loan ?

According to RBA cash rate analysts, we need find a stable rate of cash rate that might be 4.5%. When the cash rate is stable it is better to have 50% Fix and 50% variable. If there is a chance to drop the rate from stable rate client either need to wait to lowest rate to fixed the maximum up to 80%-90% if the rate is as low as 2.5%. Some portion of the home loan need to be on variable rate because client can not make any change in fixed rate portion during the time of 3 years fixed rate period. So if client need to increase loan amount in this 3 years they can increase loan on variable rate portion. Client also get benefit of 100% offset facility with variable portion of the home loan. To get best benefit from fixed rate home loan client need to make a right combination of fixed rate and variable rate home loans.

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What will happen when the fixed rate period will be finished ?

For fixed rate home loan, when fixed term is finished it is rolled over to a variable rate home loan. Basically client can get the benefit of discount offer they take at the time of application if they keep some portion of their home loan under variable rate home loan. When we select to have a combination of fixed rate home loan and variable rate home loan, we usually select the bank who offer discount for the life of the loan. We compare what is the current discount offer for the life of the loan and what is their historical trend of variable rate to find the best fixed rate home loan offer for the client.