Beware fixed rates

Attractive when interest rates are rising, fixed-rate loans also lock you in for a fixed term and as such are less flexible than variable-rate loans. You may not be able to make additional repayments or pay the loan out early without facing high penalty charges. Fixed rate loans suit borrowers who really value the certainty of knowing exactly what their future repayments will be – property investors and borrowers on a tight budget, for example. Borrowers trying to beat rate rises by picking the right time to lock in to a fixed rate are playing a risky game. Such borrowers are taking a gamble on the future and the longer the period you fix, the more of a gamble it is. Predicting interest rates three to fives years into the future is something akin to picking Lotto numbers. Use BankChoice's Split-loan simulator to compare repayments and total interest under different fixed and variable rate scenarios.