The Pros and Cons of a Fixed Interest Rate: What to Know

The upcoming new year always leads people to different speculations about what is to come. What could be the trends that will dominate the market next? What exercise or diet fads will begin to arise? Will there be another pandemic? What will happen to the economic status of Australia and its interest rates? These little details can affect a massive portion of an individual’s daily life for the rest of the year.

One major consideration for your future that you need to consider is your mortgage. If you have a mortgage or personal loan, the interest rate you get will determine how much you need to pay up. Debating whether the interest rate will retain, hike up, or decrease has become a norm every end of the year, and of course, no one can predict what is going to happen!

This uncertainty can trigger anxiety sometimes. Because of this, some people opt to get fixed-rate loans to feel more secured and in-control. These people believe that they can save more on interest if they choose this route. On the other hand, there are still people who prefer the variable-rate take chances on Reserve Bank of Australia’s (RBA) decisions and hope they get the better deal.

If you consider fixing your loan, you need to know all the consequences that might happen before you decide. To help you make the right choice, here are the advantages and disadvantages you need to know first:

The Advantages of Having a Fixed Rate

  • Certainty – People with a fixed-rate loan have a clear idea of how much they need to pay overall. Because of that, they can make the necessary financial preparations to meet their payment.
  • Retain a low-interest rate – If you fix your loan during the times of low-interest rates, you can get the advantage of retaining it for the long term. As a result, you have lower repayment, and total interest paid.
  • RBA rate announcements do not matter – Any changes made by the Reserve Bank will not affect your current loan computation.

The Disadvantages of Having a Fixed Rate

  • You have less freedom – The fixed rate will not give you as much choice as the variable-rate can offer. You are locked to the rate you took until the end of the term. That means you cannot speed up your payment because you need to meet the cap you committed to set.
  • The term will eventually end – A fixed rate will only be valid for a finite period. After the term expires, you are subject to the standard variable rate and will need to sign up to get a fixed-term again.
  • No benefit from any interest rates fall – You are left to pay the same amount as you committed until the fixed term expires.


The biggest game-changer in this equation is the unpredictable economy and how the Reserve Bank of Australia works. If you want to stay on the safe side and have better control, then a fixed-rate may benefit you. However, you cannot guarantee that the current rate is the lowest you will ever witness! On the other hand, if you want to benefit from the intermittent rates that the Reserve Bank may announce, then stay with a variable rate. Both have its pros and cons, and it is up to your financial circumstances and goals if your current loan setup works for you.

At FinanceCorp, we can help you get the better loan suited to your needs. All of the Finance Managers at FinanceCorp are fully qualified, trained and experienced mortgage professionals who live and breathe finance. We have 25 different lenders and hundreds of products with varying interest rates that you can choose from. Contact us today to learn more about how we can help you!