Should I fix my interest rate?

If you are working to a tight monthly budget and you can afford to, it might be a good idea to fix your rate now, even though fixed rates are usually higher than variable rates. Many people make the mistake of waiting for rates to rise before locking themselves into a fixed rate. “Before buying a property, stress test your budget to ensure you will still be able to meet your mortgage repayments if rates start to rise. Should the interest rate go up, you need to be sure you will still be able to afford your monthly instalments” noted Craig Hutchison, CEO of Engel & Völkers Southern Africa.

There are two interest rate options to choose from:
  • Fixed rate
For the fixed rate option, you pay a fixed instalment for an agreed period of time. The fixed rate duration ranges from 12 months to 36 months. The main difference between a fixed rate and a variable rate is that the instalment with the fixed rate does not change with interest rate changes during the 'fixed period'.
  • Variable interest rate
A variable interest rate option changes as interest rates change. When interest rate changes, the monthly instalment will also change, either decreasing or increasing accordingly.