Fixed Rate loans allow you to protect your self against possible future interest rate rises and gives you the ability to manage your loan repayments over a specified term. This allows you to budget for other financial priorities in your life comfortable in the knowledge that your loan repayments will not change over the fixed rate term.

Fixed rate terms can be nominated for periods upwards of 6 months and are usually for between 1 year and 5 years. There are banks who are prepared to fix loans for up to 10 years in certain circumstances.

The interest rate is fixed for an agreed time, meaning that your interest rate will not increase, even if there is an interest rate rise. Alternatively, it also means that if the interest rates drop you will remain locked in at the higher nominated rate for the fixed term of the loan.

At the end of a fixed rate period, most financial institutions allow you the option of nominating another fixed term or switching to another home loan package, some with nominal switching fees.

Some common features are:

• Fixed rate terms of 6mths, 1, 2, 3, 4 and 5 years
  
  


• Maximum additional payments for each fixed loan year
  
  


• Early repayment penalties can apply if the loan is repaid either partially or in full, within the term of the fixed rate. (These can often be quite substantial).
  
  


• Repayments set for the fixed rate term. These can generally be made weekly, fortnightly or monthly.
  
  


• Redraw is rarely available.