The decision to fix your rate is one that is usually undertaken to create certainty.
With Australian property finance, you have the option of fixing your interest rate for periods of between 1 to 5 years.
The amount of the fixed rate usually depends on the market outlook of where interest rates may move.
If the market considers a rise of rates is likely, then it would be common to expect fixed rates to be higher than the current floating (or variable) rate. If the market thinks rates may fall then fixed rates may be lower.
Another factor may be the supply of lending capital. If the bank has too much cash available for lending then they may offer a “special” rate to encourage borrowers to secure a portion at an agreed fixed rate.
In deciding whether to fix or not you should compare the current variable rate against the fixed rates on offer then try and make a judgement call on where you consider rates may move.
You should also be careful to not fix an interest rate longer than you expect the loan to go for as if you wish to pay out the loan during the fixed period there may be some fees to do this. Hence if you were considering selling your property in say 2 years, it would not be wise to fix the rate beyond the 2 years in case you did actually sell.
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