Interest Rate - Find out more about interest rates online

Home

Understanding Fixed Interest Rates and Variable Interest Rates

Compare interest rates & home loans offered by over 25 financial institutions online – Click Here

Understanding interest rates is essential when considering home loans. Whether you are buying your first home or considering a home improvement loan you will have to decide to on a fixed or variable interest rate mortgage.

Firstly, there are no hard and fast rules for the type of interest rate home loan package you choose, it depends on your person situation. The easiest way to find out which home loan is best for you is to contact a home loan lenders like echoice.com.au and speak to one of their consultants who will advise you on the most appropriate interest rate home loan type.

Standard Variable Interest Rate home loans are the most conventional home loan yet variable interest rates fluctuate with the market interest rate – so when the market interest rate goes up so does your rate. The market interest rate is determined by the Reserve Bank of Australia.

To find out more about interest rates from the Reserve bank of Australia, you can visit their website or download a chart on the Australian housing interest rates from http://www.rba.gov.au/ChartPack/interest_rates_australia.pdf (PDF link)

Advantages of Variable Interest Rates

* The variable interest rate is lower than fixed interest rates at the commencement of the home loan.

* If the market interest rate decreases, it is likely your home loan rate will decrease as well.

Disadvantages of Variable Interest Rates

* Payments may vary because of the market interest increases.

* There will be fluctuations in your monthly home loan repayments.

Fixed Interest Rates remain the same during the fixed home loan period, regardless if market interest rates change. This can provide you with a sense of comfort, knowing that the interest rates will not change during your mortgage period. However, if the market interest rate falls, you will not receive the benefit or lower interest rates since your home loan is set a fixed interest rate.

Advantages of Fixed Interest Rates

* Fixed interest rate loans have varying length periods.

* The rate is fixed; there will be no changes of the interest rate during the fixed period.

* You, as the borrower, will know exactly the monthly amount to repay from your mortgage account.

* You can plan your expenditure budget knowing your future mortgage payments are fixed.

Disadvantages of Fixed Interest Rates

* Fixed rates are set at a premium to prevailing variable interest rates. It is a privilege that home loan lenders charge for.

* If market interest rates decrease, your home loan interest rate remains the same.

What is the right mortgage interest rate choice?

Usually variable interest home loans are more popular than fixed interest home loan as borrowers can enjoy lower interest rates. However, the best approach is for you to make an online calculation. To see an overview of home loan rates go to eChoice – click here.