2-year fixed mortgage rates

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2-year fixed mortgage rates:

2-year fixed mortgage rates FAQs

What is a 2-year fixed rate home loan?

2-year fixed home loan rates are mortgages where the interest rate is locked in for two years. During this period, your interest rate and monthly repayments remain constant. This provides predictability and stability in your financial planning, regardless of market fluctuations.

Benefits

• predictable payments: know exactly what your repayments will be for two years
• rate stability: shield yourself from potential interest rate increases set by the Reserve Bank of Australia (RBA)
• short-term commitment: offers flexibility for those not ready for a long-term mortgage

Additional features other lenders may offer

• extra repayments: some lenders allow free unlimited extra repayments
• redraw facility: free online redraw of payments made in advance with certain lenders

Suitability

A 2-year fixed rate home loan can be useful for various types of borrowers. The following mortgages are some of the most suitable when considering if a 2-year fixed mortgage is good:

• first-time buyers: typically offers lower rates, making initial payments more affordable
• buy-to-let investors: this provides a short-term solution without needing a large deposit
• remortgaging: attractive if you foresee a decrease in interest rates within two years
• home movers: this combines stability with the flexibility to move after two years without penalties

In summary, 2-year fixed mortgage rates offer a stable and predictable repayment plan for the short term. This can be good for those anticipating changes in interest rates or their personal circumstances soon.

Is a 2-year fixed rate good?

A 2-year fixed rate mortgage can be a good choice depending on your financial goals and market expectations. Here are the pros and cons:

Pros

• predictable payments: your mortgage repayments remain the same for two years, providing financial stability
• rate protection: if interest rates rise, your fixed rate remains unchanged, potentially saving you money
• budgeting ease: knowing your monthly payments helps you manage other expenses
• short-term commitment: you’re not locked in for too long, and early-exit fees are more affordable

Cons

• missed opportunities: if interest rates fall, you won't benefit from lower repayments
• higher initial rates: fixed rates might start higher than variable rates
• fewer features: fixed-rate loans often lack features like offset accounts, common in variable-rate loans
• break fees: exiting the loan early can incur significant fees

Considerations

• market trends: if you anticipate rising interest rates, locking in a 2-year fixed rate can be beneficial
• financial planning: 2-year fixed mortgage rates offer stability, aiding in long-term financial management
• RBA rate reviews: the Reserve Bank of Australia reviews its base rate monthly, except January. If rates decrease, you can refinance at the end of your fixed term

Understanding what 2-year fixed mortgage rates are helps in making informed decisions about mortgage planning. These short-term fixed rate loans make it a sound choice for many borrowers. However, it's important to weigh the potential disadvantages, like higher initial rates and fewer loan features.

What happens after my 2-year fixed rate mortgage ends?

After your 2-year fixed mortgage rates term ends, your loan typically reverts to the lender's standard variable rate. You can choose to refix your rate, refinance with a new lender, or stay at the variable rate depending on your financial goals and market conditions.

Refix your current home loan

Consider these factors before refixing your current 2-year fixed mortgage:

• extend fixed rate: if your lender allows, you can choose to refix your loan for another term
• potential savings: avoid the risk of rising interest rates but miss out if rates drop
• future plans: refixing may not be ideal if you plan to sell, renovate, or make extra repayments

Refinance your mortgage

Some key points to consider when refinancing your 2-year fixed mortgage:

• rate review: request a rate review from your lender to ensure competitiveness
• switch lenders: explore other lenders for better deals. Compare home loan rates to find the best 2-year fixed mortgage rates Australia has to offer
• fees: be aware of discharge fees on your existing loan and application fees on the new loan
• loan options: choose between fixed, variable, or split loan options to suit your needs

Revert to a variable interest rate

Some points to think about when reverting to a variable interest rate:

• automatic reversion: if you do nothing, your loan usually reverts to the lender's standard variable rate
• flexibility: variable rates offer features like offset accounts, redraw facilities, and uncapped additional repayments
• rate fluctuations: variable rates can change based on the RBA’s cash rate and other factors
• consult lender: standard variable rates can be higher, so consult your lender for a competitive rate

Interest rate increases

Here are some proactive choices you can make when faced with rate increases:

• research competitive rates: if rates rise, compare lenders for the most competitive rates
• lender negotiations: ask your lender to review your current rate and offer a better deal
• fact sheets: request key fact sheets from potential lenders to understand the impact of interest rate changes on your repayments

These are some of the things that may happen when your 2-year fixed mortgage rates term ends. Review your options carefully, check in with your lender, or hire a mortgage adviser to know the best course of action. Analysing your choices helps you secure a plan that best fits your needs.

Can I extend my 2-year fixed-rate mortgage?

No, you cannot typically extend 2-year fixed mortgage rates at the same rate once the term expires. Instead, your lender will offer a new fixed rate based on current market conditions. This is due to changes in the wholesale money market changing daily, which affect the interest rates lenders can offer.

Options when your fixed term ends

• refix: choose a new fixed rate for another term, though it will likely be at a different rate
• variable rate: switch to a variable rate, which may offer more flexibility but can fluctuate
• refinance: explore refinancing with a different lender to find more competitive rates

There are few instances where you can extend a home loan with a fixed interest rate, but it's unlikely to retain the same rate. Reviewing your options carefully can help you select the best path forward and ensure your mortgage continues to meet your needs.