What is the difference between fixed and floating mortgage rates?

Short answer: Fixed = same rate for 1-5 years, payment certainty. Floating = moves with market, more flexible.

What this actually means in plain English

A fixed rate stays the same for a set period (1-5 years). Your payments do not change. A floating rate moves with the market. It can go up or down. Fixed gives certainty. Floating gives flexibility. Most people fix part and float part to get both benefits.

Key Facts

Fixed rate: locked for 1, 2, 3, 4, or 5 years
Floating rate: changes with official cash rate
Fixed = payment certainty, less flexibility
Floating = flexibility, but payments can rise
Split loans: part fixed, part floating

Example

Fixed Rate: 6.5% for 2 years

Floating Rate: 7.2% (current)

Loan Amount: $500,000

Fixed Payment: $3,160/month

Floating Payment: $3,382/month (if rates rise)

Split Option: 70% fixed, 30% floating

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