What's the difference between a fixed rate and a floating rate?

When you take a home loan, the interest rate you're charged comes in two basic shapes: fixed and floating (also called variable). The difference comes down to one thing — whether your rate, and therefore your monthly repayment, can change during the loan.

What a fixed rate means

Taking a home loan on a fixed interest rate means your monthly repayments will not be affected during the fixed period, regardless of market conditions. The interest rate is pre-determined and stays unchanged. You know exactly what you'll pay each month, which makes budgeting simple and protects you if market rates rise.

In the Philippines, banks usually fix your rate for a set term — commonly 1, 3, 5 or up to 10 years. The longer you lock it, the more certainty you get, generally for a slightly higher starting rate.

What a floating rate means

On a floating interest rate, your home loan repayments vary periodically over the loan term. The rate is tied to a market benchmark, so when prevailing rates move, your repayment moves with them — up or down. A floating rate can work in your favour when rates fall, but it also means your repayment is less predictable.

How they work together in a Philippine home loan

Most home loans here are a blend of the two. You typically start with a fixed period for certainty, and once that fixing period ends the loan re-prices to the bank's prevailing rate — at which point you can re-fix for another term, let it float, or refinance to a sharper deal with another bank.

Which one should you choose?

• Choose a longer fixed term if you want predictable repayments, you're on a tight budget, or you expect rates to rise and want to be protected.
• Consider a shorter fix or a floating rate if you expect rates to fall, plan to sell or refinance within a few years, or want more flexibility.
• Compare both side by side — the right answer depends on your profile, the bank, and what's happening with rates at the time you borrow.

Let Nook do the comparing for you

You don't have to figure this out alone — and you don't have to apply to each bank to see your options. Nook is the Philippines' original and award-winning mortgage broker. A dedicated loan consultant compares 20+ banks, explains the fixed and floating options side by side, and then runs your entire application end to end — every form, document and bank follow-up handled for you. Because the bank pays Nook a commission once your loan is released, it's 100% free to you.