Fixed rate home loans are becoming increasingly popular. Compare the three-year home loan interest rates.

Data shows that fixed rate loans now make up nearly half of the total mortgage market and grew from humble beginnings just a few years ago. This is because banks and lenders are offering increasingly competitive interest rates on three-year fixed rate loans and borrowers are flocking to them.

Reserve Bank data also highlights a recent phenomenon where the average three-year fixed rate is now more competitive than its floating rate counterparts.

Below you will find a selection of attractive offers for three-year home loans with a fixed interest rate for owner-occupiers and investors.

What happens after my fixed period expires?

If you’ve made it to the end of your fixed loan period, first of all, congratulations. Second, you’re probably wondering what to do next.

As soon as a fixed term expires, a lender will usually offer you the option to set a different rate or to “revert” to a floating rate. If no action is taken, a lender will usually automatically put you on what is called a revert rate.

A lender’s revert rate could either be its standard floating rate or another specialized rate. Either way, there’s a good chance this rate will be higher than what you paid earlier, so the end of the fixed term can be a good time to shop around and refinance. The benchmark rate on a fixed rate loan can be a good indicator of where your interest rate could go – a high benchmark rate could indicate a high rate of repayment.

Benefits of Three Year Fixed Rate Home Loans

• Competitive interest rates: Some of the most competitive rates advertised are available on fixed rate home loans, and three year loans seem to hit the “sweet spot” between the length of the fixed term and a competitive rate.

• Many options: There is a lot of competition in the three-year solid area, and many lenders vie for your attention. That said, if you don’t like the look of a product, it won’t be too difficult to find another product that suits your needs.

• Security of repayment: The repayments are locked for three years, which means they won’t go up if interest rates go up in the broader market. While you can pay extra up to a certain limit, the security of repayment can make budgeting easier.

Disadvantages of three-year fixed home loans

• You are locked up: As the name suggests, you are firmly involved. That makes it harder to refinance when you find another more competitive product or one that better suits your needs.

• Break fees: If you decide to break out of a fixed-rate loan before the term expires (e.g. if you need to sell your home), a lender will likely charge you an interruption fee, which can add up to several thousand depending on the time you’ve set and how long the loan will last.

• Restrictions on repayment: Fixed home loans usually have caps on the amount of additional repayments you can make in a year. Typically this is around $ 10,000, but check with your individual lender.

Three-year fixed home loans can be a good opportunity to get a competitive interest rate and have security for repayment. However, consider your personal circumstances to assess whether such a loan is right for you.

Photo by Ilyuza Mingazova on Unsplash