Where a borrower elects to fix the interest rate of their loan â€“ or part of it â€“ at a set level for a set duration. The period is usually between 1 and 5 years. Enables borrower to â€œsetâ€ their loan repayments for the period selected however rates are usually higher than the prevailing variable rates at the time of establishment. Also, lenders may charge a fee if you "break" this period ie through changing loan type or refinancing to another lender whilst still in the fixed rate period.
The interest rate on a fixed rate loan is set when the loan is opened. The interest rate remains the same through the entire term of the loan and does not change when market indexes or other interest rates fluctuate.
A loan where the interest rate is fixed for a set period, ranging from 1 to 15 years. This means your loan interest rate won't fluctuate as it does with a variable loan. Generally, the longer you want to fix your loan, the higher the interest rate will be i.e. you may be able to fix your loan for 1 year at 6.5%, or for 5 years at 7.7%.
Fixed Rate loans protect you against interest rate changes for an agreed time, so you have peace of mind knowing your repayments won't increase. Fixed rate loans lack the flexibility of variable rate loans suck as ability to make additional repayments as you like. This is a trade off for the certainty in locking in rate. If variable rates go down during the fixed rate term you won't benefit, break costs may apply if you wish to revert to a variable rate before the end of your fixed rate term