Fixed rate home loan mortgages for residential property buyers
Many people opt for a fixed rate home loan when buying a residential property and trying to find the best mortgage option for their circumstances.
A fixed rate mortgage means that your interest rate will remain the same for the initial loan period - usually for around one to five years.
Generally, if the Reserve Bank increases or decreases the official cash rate, those changes will be reflected in mortgage lenders' variable loan interest rates.
With a fixed rate however, you are protected for the term from interest rate fluctuations.
While this does mean that you won't benefit from an official cash rate drop the way you might with a variable loan, you can at least know your exact repayment budget for several years down the track.
A potential downfall of this type of mortgage for some borrowers might be the fact that they may not be able to make payments ahead of schedule.
Once the fixed rate term is up, you will need to talk to your lender about signing up for a new fixed rate loan, or switching to another loan option.