Variable or fixed rate or both?

Fixing your interest rate has the advantage of surety. You know exactly what your repayments will be for the term. This is helpful for budgeting and it gives you the peace of mind that you will not be affected by interest rate increases. However, fixed rate products lack flexibility - these generally do not allow you to make extra repayments. They may also have high exit costs.

It is now possible to have the advantages of both. That is the security offered by a fixed loan with the flexibility of a variable loan. This is called a 'split home loan' ; part fixed, part variable. This allows you to hedge your bets so that if interest rates rise, only a portion of the loan is affected. On the other hand, if you wish to make reductions from the principal then the reductions can be taken off the variable portion of the loan. Many people see this as the best of both worlds.

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