Should I get a variable rate or fixed rate loan?

The decision to get a variable or fixed rate loan depends entirely on your own circumstances and preferences.

A variable rate loan has a rate that can change – both upwards and downwards – at the lender’s discretion and therefore your required repayment amount can change – again either increase or decrease.

A fixed rate loan has a rate ‘locked’ in for a certain period (usually between 1-5 years) which gives you certainty of your repayments for that period.  This clearly assists borrowers with budgeting and planning their finances with some certainty.  Fixed rate loans will attract a ‘break cost’ if the contract is broken during the fixed period – this includes if the loan is paid out, refinanced to another lender or house is sold.

It is usually possible to split your loan so that you have both a variable and fixed portion if required.

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