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Everything you need to know about rate locking

So you’ve found the perfect property, signed the contract of sale and have just found a fixed interest home loan that suits your needs. If this is the case, it may be worth being aware of rate locking, and talking to your lender about whether it is an option that you should consider.

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So what exactly is rate locking?

Rate locking is an option that can be applied to a fixed rate home loan. This will lock in the interest rate of your fixed interest home loan before your loan application has been completed. However, some lenders will allow you to have a lower interest rate if it drops before your settlement, so make sure to check with your lender before locking your rate.

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When is rate locking necessary?

Whilst you do not have to choose to rate lock your fixed loan, it might be a good idea if you expect your application to take a while to be approved, or if you simply want peace of mind that should the interest rates rise, your home loan will not be affected.

What should I be aware of if I’m thinking about applying?

It’s important to keep in mind that your lender may charge you a rate lock fee which can amount to 0.20% of the loan amount. However, you should ask your lender about rate locking because some do offer it for free, for the first 60 days.

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When will rate locking start and end?

couple-discuss-form Starting time on your rate lock will vary depending on the lender, so it’s important to clarify with them to ensure that you do not end up paying a high interest rate. Whilst some will place a rate lock on your loan from the date you apply, others will only commence it once you’ve paid the rate locking fee. In regards to when it ends, once again this will differ from lender to lender. Some lenders offer you 60 days, whilst others are willing to rate lock for 3 months, which may be something to consider if you have a complicated loan application that is expected to take some time to process.

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What happens if the interest rate drops during the rate locking period?

Fortunately, many lenders will actually let you pay less interest on your locked rate if there is a drop in the interest rate. This is not a definite however, so it might be a good idea to consult with your lender before deciding on a rate lock.

If you are choosing a fixed home loan, it may be helpful to talk to one of our Lendi Home Loan Specialists, who can help you decide on a lender and whether choosing a rate locking option is right for you.

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Tags: fixed interest, rate lock, fixed rate home loans, home loan, first home buyer

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Important legal stuff

COMPARISON RATE WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years.
Lendi is the trading name of Lendi Pty Ltd, a related body corporate of your licensed credit assistance provider, Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence Number 442372). We will never sell your email address to any third party or send you nasty spam, promise.
EXAMPLE: This example is current as at 20th October 2016. A Click Loans Online Principal and Interest Loan of $150,000 over 25 years has monthly repayments of $767. This is calculated based on the interest rate of 3.69%, comparison rate of 3.69%, upfront fees of $0 and annual fees of $0.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
Lendi is a privately owned and operated Aussie business. Our mission is to provide Aussies with the right experience when choosing a home loan from our panel of major and non-bank lenders including Click Loans which is a wholly owned subsidiary of Auscred Pty Ltd and a related body corporate of Auscred Services, your credit assistance provider. Although Lendi compares over 1600 products from over 30 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 40% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. We have an independent and founder led board.
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