The popularity of fixed-rate home loans took off during the pandemic, peaking at nearly half of all new mortgages written in mid-2021. However with the first Reserve Bank cash rate rise in more than a decade, many lenders have moved fixed rates sharply north - particularly ones fixed for three years or more.
Luckily there are a few deals to be found for home loans fixed for shorter periods - in this instance, two years.
The table below features a selection of two-year fixed rate home loans on the market for owner occupiers.
Newcastle Permanent – Premium Plus Package Fixed Rate Home Loan Special (Principal and Interest) 2 Years
- Immediate cashback upon settlement
- $2000 for loans up to $700,000
- $4000 for loans over $700,000
Pros and cons of a two-year fixed home loan
There are a few things you’ll have to consider before pulling the trigger on a mortgage fixed for two years.
Repayment certainty: Repayments won’t fall or rise during the time of your fixed period, giving you repayment certainty.
Find your feet: The stability of a fixed rate home loan, if you’re a first home buyer, allows you to get used to paying off the mortgage without worrying about the repayment changing.
Lock-in before rates rise: Locking-in a rate for a couple of years can mean you weather any rate rises in that time. But the same goes for rate decreases too - you won’t get the chocolates.
Consider a split: Split home loans keep some of the loan variable, and some of it fixed. This gives you flexibility and some repayment certainty.
Higher interest rates: Fixed mortgage rates are typically moving upwards at a faster rate and are more expensive than variable products.
Break costs: If you leave a fixed rate home loan early, you’ll probably face break fees. These are usually a calculation based on the difference between the bank’s wholesale funding rate, your mortgage rate and how long you have left on the loan. This could add up to thousands of dollars.
Repayment restrictions: Lenders typically restrict extra repayments to $10,000 per year on fixed home loans, and there are usually penalties if you go over this cap.
Light on features: As a consequence of repayment restrictions, fixed loans might not feature an offset or redraw account.
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