Question 1

What is the difference with fixed and variable interest rates?

Accepted Answer

A fixed rate loan has a rate of interest that will not change for a set term of 1-15 years of the mortgage. A variable rate can be changed by the lender with market fluctuations and Reserve Bank cash rate decisions.

Question 2

Can I get a fixed rate for the full term of my mortgage?

Accepted Answer

No. Lenders typically approve fixed rate loans for a limited term of the overall mortgage term. They may be approved for 1-5 years, depending on the lender, the loan product and the borrower.

Question 3

Are investment property loan rates the same as owner-occupier rates?

Accepted Answer

No. Owner-occupier loans attract lower rates than investment property finance. Lenders consider investors as a higher risk than owner-occupiers.

Question 4

Will I be offered the rate advertised by lenders?

Accepted Answer

Lenders will typically advertise or display their best rates based on certain loan products and applicant profiles. These are usually for good credit score applicants. They will display a fixed and/or variable rate and a comparison rate. The comparison rate refers to the rate on a specific example when some lender costs are included. Lenders assess applications individually when preparing the rate they will offer. That rate may be their current best offer or a higher rate.

Question 5

How do rates differ with the deposit on a home loan?

Accepted Answer

The deposit determines the loan-to-value ratio which lenders use to determine the risk and interest rate. The standard deposit to be offered the best rates is 20%. Lower deposits typically attract higher rates.

Question 6

Will a low deposit home loan cost more than a standard deposit loan?

Accepted Answer

A loan with a less than 20% deposit can attract a higher interest rate and will attract Lender Mortgage Insurance. This is an additional upfront cost on the loan. LMI does not usually apply to 20% deposit loans.

Question 7

Will my payments change with a variable rate loan?

Accepted Answer

If a variable interest rate changes with either an increase or a decrease, the monthly payment will also change. Lenders advise customers of any changes to their rate and repayment and when that change will come into effect.

Question 8

When do variable rates change?

Accepted Answer

A change to a variable interest rate is a lender decision. The major banks and many other lenders will typically change their variable rate when the Reserve Bank changes the cash rates. Lenders may also change rates ahead of RBA decisions, based on their own analysts' market and economic forecasts.

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