Variable and fixed interest rates



There are two different types of interest rates to choose from when selecting your home loan. Some loans will incorporate both types throughout the term of your loan, so it is important for you to understand which rates are the best option for your situation.


  • Variable rate - This is a fluctuating rate that can go up or down. It is crucial to have disposable income available to prepare for any rises.

  • Fixed rate - This is locking in one rate for a fixed period of time. This will protect you from any interest rate rises and will give you control over your home loan repayments as you will know exactly how much you will be paying for that selected term.

The benefit of a variable rate is that you can usually make extra repayments into your loan to reduce the interest payable and hopefully the term of your loan. With fixed rate loans, there can be limitations on the amount of extra repayments you can make. Fixed rate loans are locked in, so if interest rates go down, you may end up paying more than you would if you have a variable rate. However if rates go up and you have a fixed rate you’ll be ahead.

Some banks, like Bank First allow you to split your loan into variable and fixed. This way you can take advantage of the benefits of both options; to safeguard a portion against future rate rises whilst also being able to make extra repayments into the variable portion.

When comparing interest rates on home loans, it is important to also look at the comparison rate. A comparison rate takes into account the interest rates and known fees and charges for the loan, to give you a more accurate indication of the cost of the loan.