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Fixed Rate vs. Variable Rate The two most common loans offered are fixed rate mortgages and variable rate mortgages. A fixed rate mortgage comes with an interest rate that is fixed for a set amount of time whereas a variable rate mortgage will fluctuate as the market changes. The benefit of a fixed rate mortgage is to protect you from the risk of increasing interest rates and subsequently higher repayments. If interest rates rise, you are fixed on paying the lower rate. Conversely, if interest rates should fall, you are locked into the fixed rate and will pay above market rates for your home loan. A variable interest rate home loan allows interest rates to fluctuate with the market, depending on the economic environmnet. Initially, a variable rate will be lower than the fixed loan. However, if interest rates do rise in the future, it is likely the fixed rate loan will be cheaper. Deciding whether a variable or fixed rate loan is best for you will come down to your unique financial situation. For example, if you expect your income to rise in the future, then a variable rate loan will help you to pay more back in the short term and should rates rise, you can still afford the loan because of your increased pay. You should also consider your risk tolerance. A fixed mortgage lets you plan and budget, sometimes years in advance, to make sure you can continue to afford the loan. If you need help identifying which loan option is best for you, contact a Kiwi Mortgage Market Broker for a no obligation discussion. Our brokers will advise you on the various options and benefits of different home loan products and work to get you the best deal on your loan. Find our more about ... 15 Ways to Save
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