If you’ve been watching interest rates closely and are thinking about locking in a fixed rate for your home loan, there’s an important tool you should know about: a rate lock.
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What Is a Rate Lock?
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When you apply for a fixed-rate home loan, there’s usually a period of time between submitting your application and settlement — and during that time, lender interest rates can change. A rate lock is a feature that guarantees your fixed interest rate at the time of application, protecting you from any rate increases that occur before your loan settles.
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Without a rate lock, you could end up with a higher rate than you expected if rates rise during the approval and settlement process.
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Recent Changes to Rate Lock — What’s New
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One of our lenders has recently updated its rate lock process, making it simpler and more flexible for customers. Here’s a summary of how it works:
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- Multiple rate locks are now permitted on a single application — useful if your settlement is delayed or circumstances change.
- The fee is $750 per rate lock, per split (i.e. if your loan is split between two fixed portions, each split requires its own rate lock fee).
- The fee is payable at settlement, and can be paid from your loan proceeds — so you don’t need to come up with the cash upfront.
- Rate locks can now be added digitally at the time of application — no paper forms required.
- If you decide to add a rate lock after your application has been submitted, it can still be arranged through your broker.
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Is a Rate Lock Right for You?
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A rate lock is particularly worthwhile in a rising or volatile rate environment, where there’s a real risk that rates may increase before your loan settles. The cost of the rate lock ($750 per split) may be well worth it compared to the potential cost of a higher interest rate over the life of your loan.
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If you’re considering fixing your rate and want to know whether a rate lock makes sense for your situation, speak to your Finance Hub broker. We can help you weigh up the options and take the right steps to protect your rate.
