Don't Lose Control with CBA's Fixed Rate Loan

You can't control the weather, the cost of living or the type of music your neighbours may play at 2am, but with a fixed rate loan, you can have some control over the rate of interest you pay on your home loan.

A fixed rate loan offers an unchanging interest rate that is generally locked in for one to five years. The Commonwealth Bank offer a one to five year fixed rate loan, and also the option of a seven, ten or even fifteen years fixed term.

A fixed interest rate, and therefore the monthly repayments, will not change for the term of the fixed period. CBA locks in interest rates at a higher level for the seven, ten and fifteen year fixed rates to allow for inflation and interest rate rises over the longer term.

The monthly repayments for those with variable rates will fluctuate according to interest rate changes, but the advantage to a fixed interest rate as offered by CBA's fixed rate loan is that homeowners can budget and know exactly what their repayments will be for the term of the fixed rate.

Choosing a fixed rate loan such as the one offered by CBA means that if interest rates fall during the fixed period, your interest rate may be higher than the variable rates available. A fixed rate will protect you from any interest rate rises, but it also means you won't benefit from lower repayments should interest rates fall during the period of your fixed interest.

When exploring your home loan options, remember to look at not only the interest rate, but the features offered by any particular loan and your need to access these features. For example, CBA's fixed rate loan does not have a redraw facility, so you wouldn't have the ability to access any extra cash. Extra repayments are allowed, but only up to a maximum threshold of $10,000, so you couldn't take advantage of the fixed rate to pay off the total amount of your loan any sooner.

If you are considering a fixed rate loan, weigh up the reasons you would like to fix your rate; you may find that a split loan would work for you. This means your loan can be divided across a number of options including fixed and/or variable rates. Whichever loan you decide to commit to, be sure to be in control of your financial situation by researching your options first.

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