What are the advantages and disadvantages of fixed and variable interest rates?

Fixed and variable interest rates are two common types of home loan interest rates available to borrowers. Each type of interest rate has its own advantages and disadvantages. Advantages of Fixed Interest Rates The main advantage of a fixed interest rate is the certainty it provides. With a fixed interest rate, you know exactly what your repayments will be for the duration of the fixed period. This makes budgeting easier and helps you plan for the future. Fixed interest rates also tend to be lower than variable rates, so you could save money in the long run. Disadvantages of Fixed Interest Rates The main disadvantage of a fixed interest rate is that you may be locked in for a period of time and unable to take advantage of any potential rate drops. If the fixed rate is higher than the variable rate, you may be paying more than you need to. Additionally, if you want to break the fixed rate period early, you may incur a hefty fee. Advantages of Variable Interest Rates The main advantage of a variable interest rate is that it can go down as well as up. This means that if interest rates decrease, you could benefit from lower repayments. Variable interest rates also offer more flexibility than fixed rates, allowing you to make additional repayments or even redraw funds if you need to. Disadvantages of Variable Interest Rates The main disadvantage of a variable interest rate is that it can go up as well as down. This means that if interest rates increase, your repayments will also increase. This could make it difficult to budget and plan for the future. Additionally, variable interest rates tend to be higher than fixed rates, so you may end up paying more in the long run. Ultimately, the type of interest rate you choose will depend on your individual circumstances and financial goals. Before making a decision, it’s important to do your research and compare different interest rates to find the one that’s right for you. You can also check out Goodrate on https://goodrate.com.au/home-loan to see current interest rate offers.