The Fixed or Variable Question Remains

The question is often asked whether it is better to have a fixed or variable interest rate on your home loan.
Removing uncertainty is what fixed rates are all about – locking in your interest rate and locking in your loan repayments for a certain period of time. The catch is that while exit fees have been banned on all new loans, lenders can still legally penalise you for exiting a fixed rate loan during the fixed rate period: It’s called a break fee and can easily run into thousands of dollars.

With a variable rate the risk is that even when the RBA suggests rates should be on hold or fall, lenders may act differently. However, if you are able to handle the risk and impact of rate increases, you will generally (but not always) benefit from a lower daily interest rate, more flexible offset options and be able to change lenders if you desire.

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