The duration of a fixed rate home loan is usually one to five years and their repayments are fixed. Some lenders allow borrowers to either change the rate or opt for split loans. A fixed rate home loan can protect borrowers from the various market forces affecting interest rates but on the other hand, fixed rate borrowers miss out on savings from low interest rates that the variable interest rate borrowers enjoy.

While rigid conditions usually accompany fixed rate home loans, there are now several flexible new products out in the market, the majority of which offer extra repayments and redraw facilities. A fixed rate home loan gives the borrower more control over their budget and offers a certain degree of security. Borrowers should steer clear of fixed rate home loan plans that impose charges for making early repayments so that if the financial situation of the borrower improves, the lender charges a fee or demands that the borrower revert to the original term and the original interest. When choosing a fixed rate loan, borrowers should pay special attention to the terms. Most people find that a three-year payment plan is ideal in terms of security and flexibility on the part of the borrower. The decision should always be based on the financial situation the borrower is currently in.

Mel writes about getting a fixed rate home loan, and other finance topics.