Fixed Rate Loan

A fixed rate home loan is where the interest rate is locked for a contracted period of time

In that period of time, the interest rate and loan repayments stay the same

How long is a fixed rate term

The borrower requests the length of time

This can vary, typically a fixed rate term will last between one to five years

After the fixed term finishes the interest rate will revert back to a variable interest until another fixed term is negotiated

Certainty of knowing your repayments for the period fixed, consistent repayments may make budgeting easier
If your lender puts rates up, this will not affect a fixed rate loan and your repayments
Generally fixed rate loans can potentially be a cheaper rate, as it comes without features like an offset account

A fixed term loan is a contract for a period of time, if the contract is broken within the fixed term period, typically you will be charged a break fee (exit costs) by your lender
If your lender puts their interest rates down, you will miss out on lower repayments as your interest rate is fixed
Generally fixed term loans lack flexibility to make extra repayments and in many cases may not have the option of an offset account or redraw facility
Plan to refinance or sell your property in the fixed term period (exit costs) it will cost to exit the fixed term contract
Extra repayments can be limited and usually have restrictions