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Compare Three-Year Fixed Rate Home Loans

Compare three-year fixed rate mortgages with Savvy from a panel of trusted Australian lenders.

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, updated on August 8th, 2023       

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When you are looking to purchase property, a big part of deciding which home loan to choose is determining how you want to pay interest.  A fixed rate home loan is one which presents unique upsides that might be best suited for you as a buyer. In this guide, you can find out all you need to know about three-year fixed rate loans to help inform your decision-making process, as well as what you should consider when comparing fixed rate loan options.

How do I get the best three-year fixed rate on my home loan

In order to get a fixed rate home loan with the lowest possible interest rate, there are several approaches that you should consider:

Provide a larger deposit

By saving until you can afford to pay a deposit equivalent to 20% or more of the value of the property you wish to purchase, you will be most likely able to receive a more attractive interest rate from your lender. This is because by providing a larger up-front deposit, you reduce the overall risk posed to your lender, meaning they are able to justify taking slightly lower fees.

Show a strong financial record

If you are able to show that you have a strong, consistent income, have practiced the ability to budget well over the past 6 to 12 months, have been able to manage regular savings and have been disciplined with your spending, you can show that you will be able easily manage your mortgage repayments and may have a better chance at finding a lower rate.

Use a guarantor

By asking a close family member or friend to act as a guarantor for your loan, your lender will have extra security for your loan and therefore be able to offer you a more favourable interest rate. By acting as a guarantor for you, your friend or relative will be responsible for covering your debts if you default on your repayments.

Shop around

Different lenders can offer a wide range of different rates, so unless you do your due diligence, you won’t know if there’s a better rate out there than the ones you’re being offered. Use Savvy’s comparison tools to make sure there’s no better alternative for you that can offer a similar loan, only at a better rate.

How should I compare three-year fixed rate home loans?

The easiest way to compare three-year fixed rate home loans is by using Savvy’s online comparison tools. These provide you with a quick and easy-to-comprehend breakdown of your current fixed rate loan options and the features which makes each choice unique. Once you have found your shortlist, some of the important factors which you should use to compare your options include:

Interest rates

The interest rate that you will be applied to your fixed period is obviously an important deciding factor in what will ultimately be the most appropriate home loan for you. Because you will need to be comfortable with this rate for a period of years, you should try to find a fixed rate loan with the lowest possible interest rates.

Extra repayment options

If you’re opting for a fixed-rate loan, it may be because you feel the rate that you’re getting is competitive and relatively low. This might mean that you will have room in your budget to save surplus funds for a rainy day, or to make extra repayments to your mortgage ahead of time.

By checking whether or not the lenders you are looking into offer the capacity for you to make extra repayments, you can make sure that you have the level of flexibility you need when entering into your loan. Furthermore, you should compare the fees (or lack thereof) charged by each lender for early repayments and weigh up whether these costs are appropriate for you.

Break costs

While the idea of a three-year fixed rate period does seem appealing, there is always a chance that you will wish to revert to a variable rate part-way through this term. For example, economic circumstances might dictate that interest rates fall significantly. This will typically come with a break cost, which covers the expense the lender must carry for changing your agreement. Always ensure that, if you do break your loan, the cost of these fees don’t outweigh the savings you’ll make by switching.

Length of fixed period

Although you might have decided that a three-year fixed rate loan is the right arrangement for you, it is still worth comparing the costs of different fixed rate periods offered by other lenders. You might find that, by opting for a longer fixed rate period, you stand to experience more savings and enjoy the ease of budgeting for longer. Similarly, you might decide that a shortened fixed period is worth pursuing due to the lower rates offered for that particular period.

The pros and cons of three-year fixed rate loans

PROS

Easy budgeting

Because your interest costs will not change, your monthly loan repayments will remain the same, allowing for an easier time planning your budget.

Can avoid extra interest costs

You are protected against interest rate fluctuations which could otherwise result in your monthly repayments increasing.

Security can reduce interest

Providing collateral as part of your loan can ensure that you lock in the lowest fees

CONS

Break costs

If you wish to terminate your fixed rate period, then you will need to pay additional fees, such as break costs.

Can miss out on interest savings

If interest rates fall during your fixed rate period, then you might miss out on interest savings which you would receive under a variable rate loan.

Limited fixed rate periods

Your fixed rate will only be guaranteed for a limited time, meaning that any benefits could be short-lived.

Frequently asked questions about fixed rate home loans

Why is three years a good length of time for a fixed rate period?

A three-year fixed rate period allows enough time for any potential savings made on interest costs to be worthwhile, while also being a short enough period of time that if variable interest rates were to shift in your favour, the extra interest paid under your fixed rate will not be significant enough to be financially debilitating. Furthermore, three years provides a reasonable amount of time to accumulate savings, improve your budgeting or otherwise prepare for any future rate increases at the end of this period.

Once my three-year fixed rate period ends, can I extend this, or renew it?

At the end of your initial fixed rate period, you will not have the option to extend it, but you will have the option to refix your rate for a new period of an agreed upon time. The chances that your interest rate can be refixed at exactly the same rate as before are slim. This is because the interest rates that lenders are able to offer you are a reflection of the RBA’s official cash rate, which is subject to change throughout the duration of your three-year period.  

 

When should I choose to lock in my interest rate for a three-year period?

While there is no crystal ball when it comes to predicting interest rates, the general consensus is that fixed rate mortgage options are best taken advantage of when current interest rates are low, unlikely to fall further and have a reasonable chance of seeing upwards movement before the end of your prospective three-year fixed rate period.

Am I guaranteed to benefit financially from choosing a fixed rate home loan?

No – the tangible benefits that you can derive from a fixed rate mortgage are all potential savings, in that they are not realised unless a change in interest rates occur which would negatively impact you had you not chosen your fixed rate. So, while you are not guaranteed to cut down on interest expenses with a fixed rate period, you can still enjoy the peace of mind of knowing that your monthly mortgage costs will be fixed, meaning that you can budget more easily and plan your finances with no unwelcome surprises.  

Which lenders can give me the best deal on a three-year fixed rate mortgage?

While it is at the discretion of individual lenders what kind of home loan deals they are willing to offer to applicants, smaller lenders such as online specialists are often able to offer the lowest rates and fees, particularly compared to banks. These lenders tend to not be able to offer as great a range of home loan features as larger lenders such as banks, though, which you may prioritise above other aspects of your home loan. 
 

Can I still make extra repayments under a fixed rate home loan?

You will still be able to make extra repayments towards your mortgage if you opt for a fixed rate loan with most lenders. However, there will often be a cap on the total sum of extra payments you can make annually. For example, some lenders might cap extra repayments at $10,000 per year, meaning that, over the course of a three-year fixed rate period, you will be able to make total extra repayments of $30,000. While this is still a significant and helpful contribution, you should make sure that you are aware of any such limits.

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