Also called: Fixed rate, Variable rate
Fixed and variable rates
A fixed rate is locked for the term of the contract so repayments do not change, while a variable rate moves with the lender's pricing or an underlying benchmark. Most Australian equipment and vehicle finance is written at a fixed rate; overdrafts and lines of credit are usually variable.
What is a fixed and variable rates?
A fixed rate is locked for the term of the contract so repayments do not change, while a variable rate moves with the lender's pricing or an underlying benchmark. Most Australian equipment and vehicle finance is written at a fixed rate; overdrafts and lines of credit are usually variable.
Example
A five-year fixed chattel mortgage keeps the same monthly repayment throughout, while a variable overdraft repricing by 0.5% changes the interest cost immediately.
Why it matters
Fixed gives certainty for budgeting but usually carries break costs; variable is flexible but exposes you to rate movements.