Understanding interest rates
Category Advice
Understanding fixed and variable interest rates
When your home loan is registered, you have the option to keep a variable interest rate or apply for a fixed interest rate. Understanding the difference between the two will help you decide which option is best suited to your needs.
Where do interest rates come from?
The interest rate on your home loan is linked to the prime lending rate, which can change. A variable interest rate changes with the prime lending rate, while a fixed interest rate stays the same for a specific period for which it has been granted.
Fixed interest rate
- You can apply for a fixed rate once your bond account is registered
- Your interest calculations will be fixed for the period you choose
- A fixed interest rate lets you plan ahead because you will know exactly what you will be paying
- When the fixed interest rate period expires your Home Loan will automatically revert to a variable interest rate
Variable interest rate
This is entirely up to you and your circumstances. Look at the two different interest options then think about your needs and what you can and will be able to afford. A fixed-rate allows you to plan with your home loan repayments. A variable-rate means you could either save or you could pay more. Like all things financial the best thing to do is gather as much information as you can, plan your outlook realistically, and don't be scared to get some extra advice! At LRE Group our Real Estate Professionals are qualified to assist you throughout the process of purchasing your home, and are able to offer that extra advice you may need to make an informed choice when deciding on which interest rate to choose.
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Author: LRE Media