Interest rates are dropping again and have hit levels that a few years ago would seem unimaginable. Special rates are as low as 4.85 per cent fixed for 18 months.

So is it time to fix your home loan rate? With floating rates still above 6 per cent, there is money to be saved if you fix.

If you have a $500,000 mortgage, moving from a floating rate of 6.4 per cent to 4.85 per cent could save you $200 a fortnight.

The argument against fixing is always that you do not know what interest rates might do in the meantime. Do they have further to fall? Could you miss out on a better rate by grabbing one now?

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Predicting interest rates requires a highly functioning crystal ball. Not so long ago commentators were saying it was unlikely rates would drop below 5 per cent.

But if I were putting my money on it, I'd say it seems likely that low rates will stick around.

Although house prices are hot in many centres, inflation is very low, commodity prices are down, and the outlook globally is not as strong as it has been. Our short-term interest rates are dictated by the official cash rate, which was cut again last week.

If you're wondering what to do with your mortgage, the solution could be to chop it up.

Instead of fixing all of it for a long period, divide it into three or four smaller loans, then stagger them. One could be fixed for six months, one for a year, one for two years, and one left floating. That gives you the advantage of money saving but more flexibility than full-on fixing.

It all depends on your circumstances, though. If you live on a tight budget and value knowing exactly what your mortgage payment will be each month, that is a perfect reason to get one of the longest rates you can. With some available below 5.5 per cent, it still is not an expensive option.

If you're worried, get some advice from an expert.