Fixed rate home loans
Fixed rate home loans provide you with certainty over your repayments for a pre-determined period of time. Your Loan Market mortgage broker will help you determine what length your fixed term should be, based on your financial situation and your personal preferences.
attaining mortgage repayment Certainty
To attain mortgage repayment certainty by securing a fixed rate home loan or to talk to a Loan Market mortgage broker about the home finance options that are in your best interest, call us on 0508 722 205 (+64 9 377 7347) or email us the form on this page.
At the end of your fixed-rate period, your home loan will generally revert to the lender’s standard variable rate, unless you have negotiated something different.
How do fixed rates work?
Fixed rate home loans lock in a specific interest rate for a term ranging from six months to 10 years. Currently the majority of home loans in New Zealand are fixed. You should however check with your Loan Market mortgage broker before making a decision to fix.
What about flexibility and fixed rate home loans?
Traditionally, fixed rate home loans provide interest rate and repayment certainty but little flexibility. Although still not as flexible as a standard variable rate home loan, fixed rate home loan flexibility has improved over recent years.
For example, with many fixed rate home loans, you are now able to make additional repayments up to a set amount without being penalised. A home loan offset account may also be available. Your Loan Market mortgage broker will be able to confirm what features are available for the specific fixed rate home loan you are considering.
Be aware, with fixed rate home loans you are likely to be liable for hefty exit fees if you pay the loan out before the end of the fixed rate period.
break costs on fixed rate home loans
When interest rates fall, it may look at your current fixed rate and think you would be better off refinancing to a variable rate home loan to take advantage of rate cuts. However, you should be aware that there are break costs associated with exiting a fixed rate home loan early.
Break costs are made up to two components; a relatively small home loan exit fee, and another fee that covers the economic cost to your lender of no longer having your fixed rate home loan.
It is this second fee that can make exiting a fixed rate home loan an expensive exercise. Each lender has a different way of calculating break costs, but generally speaking, they will want to recover the cost of the interest and fees you would have paid to them had your fixed rate loan run its full term. The earlier in the loan term you exit a fixed rate, and the larger your loan, the higher your break costs will be.
You should also be aware that there are also likely to be some fees to set up your new variable rate home loan too, particularly if you are also changing lender. A list of likely fees and charges can be viewed under Home Loan Fees and Charges.
When Should I fix versus going variable?
Many consumers are unaware that the variable rates move differently to fixed rates and by the time variable rates have bottomed they have missed the best opportunity to fix. While variable interest rates are influenced by the Reserve Bank, fixed rates are quite different. Fixed rate pricing is driven by those who invest in the fixed rate wholesale markets.
It’s important however to always consider your financial situation and motivation for fixing to determine if a fixed rate home loan is the right choice for you, regardless of the interest rate environment at the time. Normally at least one lender will have a special on fixed rates at any given time, which may help you with your decision.
If you require certainty of mortgage repayments, fixing all or part of your home loan is certainly an option worth considering. Your mortgage broker will assist you in finding a suitable fully or partially fixed rate home loan with the right structure at any time you need one.
secure a fixed rate home loan
To secure a fixed rate home loan or to get an assessment of the fixed term that is in your best interest, talk to your local Loan Market mortgage broker. Or call us at any time on 0508 722 205 (+64 9 377 7347).
