Fixed v floating – the great rate debate
Official interest rates are still at record lows, and debate continues to run hot on the pros and cons of fixed rate loans versus floating rates.
Fixed rate loans are available with interest rates of less than five per cent, and are currently generally less expensive than floating loans.
If rates fall further, fixed rate loans may end up looking less attractive by comparison – and the reverse holds true if they rise.
Fixed rate loans make it easy to budget, but are often less flexible in terms of extra repayments.
It’s worth noting that there are also penalties for paying out fixed rate loans during the fixed period – something to bear in mind if you want to sell or move to another lender in the near future.
Split loans attempt to combine the best of both worlds, comprising both a fixed component and a floating one.
Interest rates are not the only aspect that matters when selecting a loan – the fees and features also need to be considered when comparing different products.