The Fixed Rate Home Loan allows the borrower to fix the interest rate for the term of the loan - usually between one and 5 years. This means that the monthly loan repayments will remain the same for the duration of the fixed period.

Borrowers tend to choose such loan products in times of uncertainty or whenever they prefer the comfort of knowing that their repayments will not be increased during the ‘fixed period’.

The rate at which these loans are fixed is usually above the current variable loan rates – hence the borrower has to pay for the added security of a fixed rate. Fixed loans often do not offer the flexibility to make extra repayments and thus shorten the duration of your loan.

Naturally if interest rates fall during the fixed period you will be paying a higher rate compared to the variable loan products. If this occurs and you choose to refinance your loan, you will find that ‘break-up’ costs associated with leaving a higher ‘fixed-rate’ mortgage and going into a lower rate variable product could go into many thousands.

Hence fixing the rate on your mortgage is always somewhat of a gamble.