• The interest rate is fixed for a certain period, usually the first one to five years of the loan. This means your regular repayments stay the same regardless of changes in interest rates. At the end of the fixed period you can decide whether to fix the rate again, at whatever rate lenders are offering, or move to a variable loan.

    Pros

    Your regular repayments are unaffected by increases in interest rates.

    You can manage your household budget better during the fixed period, knowing exactly how much is needed to repay your home loan.

    Cons

    If interest rates go down, you don’t benefit from the decrease. Your regular repayments stay the same.

    Only limited additional repayments of the fixed rate portion are allowed.

    You will be penalised financially if you exit the fixed portion of the loan early.

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