Three years is a long time, but not when you consider most home loans have 30-year terms. Three-year fixed rate loans appeal to some borrowers for the following reasons:
A 3-year fixed rate home loan is like any other home loan: you borrow money and repay it over the loan term. But for the first 3 years of the loan your repayments will stay the same every month.
After the fixed period, your loan reverts to a variable rate loan. Variable interest rate home loans can change at any time as lenders respond to changes in money markets and the overall economy.
Most lenders offer fixed rates between 1 and 5 years. Learn more about different fixed periods with these guides:
In the current mortgage market, 3-year fixed rate loans are definitely higher than comparable variable rate home loans. This is true almost all the time, but for a while in 2021 a lot of fixed rate loans were actually lower than variable rate loans.
This is a rare event, and only happens when interest rates are very low across the board. Now that interest rates have risen again, variable loans are the lowest interest rates on the market.
A fixed rate loan is more about certainty than getting the lowest possible deal, especially now that fixed rates are higher. It's not necessarily too late, if your goal is to focus on peace of mind rather than getting the lowest and cheapest possible rate.
You can see the current difference between fixed and variable rates on our average interest rates guide.
To make sure you get a great deal on a 3-year fixed rate loan, pay attention to the rate, the fees and the loans' features.
Focus on the following:
Even if fixed rates are higher than variable, it's important to compare multiple 3-year fixed rates to find a good deal. Why pay more interest for no reason?
Some home loans have lots of fees and others have none. A lower interest rate is more important, but the fewer the fees, the cheaper the loan will be.
Fixed rate loans have fewer features than variable rate loans, like 100% offset accounts or the ability to make extra repayments. But some do, so it's worth comparing.
3-year fixed rate loans are a common home loan type. Both owner-occupiers and investors have a lot of loans to choose from.
Beyond the standard fixed rate principal-and-interest home loans, borrowers can also consider:
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How is your comparison rate calculated?
Hi Greg,
Thank you for your comment.
All comparison rates are calculated by each individual financial institution and they each may have different ways of calculating them. Generally, they are calculated with upfront and ongoing fees using the example of $150K over 25 years.
You may read our comparison rate guide on the importance of comparison rates when comparing home loans.
For further information on a particular rate, you will also need to contact the lender directly.
I also recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that’s more inclined to review your application.
Regards
Jodie
Thanks, however, if there is no standard method for all lenders to calculate comparison rates, and if as you state they all use different methods then the whole intent of comparison rates is lost??
Hi Greg,
Lenders are the people who know how exactly they work out the comparison rate for any product as there are multiple factors that are not static across all borrowing needs, lenders, and products.
In general, they are calculated with upfront and ongoing fees using the example of $150K over 25 years (or similar), but if you would like further information about a particular comparison rate I would suggest contacting the lender advertising it.
As mentioned on our Australian Home Loan Comparison Rates, this is introduced as a way to make lenders accountable for advertising the actual cost of a loan rather than luring borrowers with a low-interest rate then having possible higher fees or charges attached.
I also recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that’s more inclined to review your application.
Regards
Jodie
which banks the lowest fix 3 years home loan
Hello Anne,
thanks for the question.
Out of the lenders we compare you can find the lowest three year fixed rate by clicking the ‘interest rate p.a.’ sorter in the table above so it sorts the smallest rates first. We try to include as many loans as we can, but do not compare every product, so keep this in mind.
Remember that the lowest rate isn’t always the best loan. Take into account features such as the ability to make additional repayments, offset accounts, redraw facilities and more.
I hope this helps,
Marc.