Help needed: fixed and variable interest rate.

I am a first home buyer. How do I determine whether I should go for a fixed or variable rate? What are the things to remember?

Also, is it a common practice to negotiate a rate (either fixed or variable) with the bank? If yes, can I still negotiate a rate after I have been pre-approved?
Hate to say unless you score high up on the credit score ladder it wont be a matter of negotiating a better deal that that advertised with your Bank but more of a matter of whether you can get a deal approved full stop.

If LMI is involved be preapred to be thru the ringer by the mortgage insurer who after you have provided them with everything may still say NO.

Borrowing these days is not a forgone conclusion and i guess like many other Brokers on the forum nothing suprises me these days when i hear a loan has been declined irrespective of the quality of the applicant.

Let your Broker do the negotiations for you by sourcing a lender to meet your needs rather than grabbing a lender and trying to get them to relax their policy or T & C's. It just wont happen.
Here's some basics.

With a fixed rate loan, the interest rate is fixed for a specific period of time, generally between one and five years. A fixed rate loan is great if you require certainty of knowing what your monthly repayments will be. If interest rates rise, your interest rate will remain the same. The downside is that you won’t benefit from decreasing interest rates and a fixed rate loan generally lacks the flexibility and the features that come with a standard variable rate loan.

Fixed rates are starting to drop a little, however, some would argue that most fixed rates are still too high at present.

The interest rate varies throughout the term of the loan which is generally the result of movements in the Reserve Bank of Australia’s official cash rate. These loans usually offer flexibility and might include features such as an offset facility, redraw facility and no limits on additional repayments. The great thing about a variable loan is that if interest rates fall, your repayments will fall. However, if interest rates rise so will your repayments.

You could always have a combination of both.


Jeez Jamie with several good 3 years rates under 7% they are pretty attractive - AMP's offer today of Basic (with offset) variable at 6.64% and a free split with 3 year at 6.99% makes for a nice owner occupied option. Sure rates may fall further but there are no indications at this time that the variable will drop and as I said elsewhere September 2 years ago variable rates were well over 8% in fact AMP's Basic then was 9.05% and not uncompetitive.