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The advantage of a ratelock is that it gives you the option to ‘lock in’ a fixed home loan interest rate for a period — typically up to 60 days — to protect you against interest rate increases.
To enter a ratelock agreement you will need to have a confirmed settlement date, the exact loan amount, and an agreed interest rate (floating rates by their nature are variable and cannot be locked in).
Over the past few months the media has been advising people to negotiate home loan interest rates with their lender. However, unless you have a ratelock agreement in place, your newly negotiated interest rate isn’t necessarily guaranteed to apply on settlement day (or home loan roll-over, for those with existing facilities). The interest rate applicable to your loan is subject to change and will be drawn down on the prevailing interest rate of the day, which could be higher or lower than the rate first discussed or documented.
In essence what you are likely to be negotiating is a discount on the interest rate. For example if the home loan interest rate is 5.75%pa for three years and you negotiate a discount of 0.2%, you may be thinking that your loan will draw down at 5.55%pa; however if interest rates move and the three-year rate increases to 5.85%pa your home loan will actually draw down on 5.65%pa.

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