fixed home loans are certainly good to make sure your interest rates do not rise, but they cannot be taken out over the whole life of a home loan.
If you do not know much about home loans, you might wonder what all the fuss about interest rates is. Even though they tend to go up a lot of the time there are fixed home loans that make sure your interest doesn’t go up. So why worry?
The problem is twofold. Firstly, a home loan is taken out over a period of 25-30 years. During this time the general interest rates are likely to rise and fall several times. If you take out a fixed home loan for a long period of time and the interest rates plummet, you are going to feel really bad because you are then paying much more interest than everyone else. Not that your rates have changed; general rates have.
Another problem is that you cannot actually get a fixed rate loan for 25-30 years. Most last for much less time than that; far too short a time to get all that money paid back, plus interest. But lenders have seen the plight of borrowers and worked out a solution. The split loan has the first portion of the loan fixed and the rest variable. So borrowers can work out a budget when they first get the loan and may be struggling financially.
Then later on when they may have received an increase in their pay cheque and the kiddies are old enough to attend day-care, allowing the mother to work, the loan switches back to variable. Maybe the interest rates will then go up – but maybe they will fall and be even less by then. It’s all in the luck of the draw.