Most Australians go for variable rate home loans. Borrowers who do fix, typically do so for 1-3 years.
Fixing your rate for 4 years means your interest rate will be higher (and thus more expensive). And if you want to refinance the loan or end it during the 4-year fixed period, you'll pay a hefty fixed rate break cost.
But there are some reasons people choose these loans:
Repayment certainty. Your repayments won't change for 4 years. This means you know exactly how much to budget for your mortgage repayments for quite a long time. For some people, that beats the savings that come with a lower interest rate.
Forget about rate rises. Borrowers on variable rate home loans know that their home loan rate could rise at any time. With fixed rate loans, you don't have to worry. For some borrowers, this peace of mind is worth getting a higher rate.
Fixing for the long term. Fixing your rate for 4 years appeals to a borrower who wants to "set and forget" their rate.
Why are 4-year fixed rate loans less popular?
There are a couple of downsides to fixing for a long time that put off many borrowers:
Higher rates. Rates for a 4-year home loan tend to be higher than most fixed rate loans. This makes your monthly repayments more expensive.
Higher break costs. If you exit a home loan early or need to refinance suddenly, you have to pay a break fee if you have a fixed rate loan. The fixed rate break cost is determined partly by your loan amount, your rate and how long is left on your fixed period. The longer you have left, the higher the cost will be.
How do 4-year fixed rate home loans work?
A 4-year fixed rate home loan is like any other home loan – you borrow money and repay it over the loan term. But for the first 4 years of the loan, your repayments will stay the same every month.
The revert rate
After the fixed period, your loan reverts to a variable rate loan. Variable interest rate home loans can change at any time as lenders respond to changes in money markets and the overall economy.
When your fixed rate ends, it's a good time to compare home loans and see if you can get a better deal on a new variable rate loan. You could also get a new fixed rate loan instead.
Other fixed rate periods
Most lenders offer fixed rates between 1 and 5 years. Learn more about different fixed periods with these guides:
Are 4-year fixed rates higher than variable rates?
On average, 4-year fixed rates are much higher than variable rates. However, for a brief period in 2021, several lenders offered incredibly low rates for 4-year fixed rate loans. These products had rates under 2.00%.
If you'd fixed for 4 years at that point, you'd have one of the lowest rates on record until 2025. That's incredible, considering that variable rates are now around 6% at the lowest and 4-year fixed rates are slightly higher.
This was a rare event and required a very unique set of circumstances (including a very low rate lending environment). Now, once again, variable loans are the lowest interest rates on the market.
Is it too late to lock in a low 4-year fixed rate?
If you want a really low fixed rate, a 1- or 2-year rate will probably be lower than a 4-year rate now.
To make sure you get a great deal on a 4-year fixed rate loan, pay attention to the rate, the fees and the loan's features.
Focus on the following:
Get a lower rate
Even if fixed rates are higher than variable rates, it's important to compare multiple 4-year fixed rates to find a good deal. Why pay more interest for no reason?
Get a loan with low fees
Some home loans have lots of fees and others have none. A lower interest rate is more important, but the fewer the fees, the cheaper the loan will be.
Loan features
Fixed rate loans have fewer features than variable rate loans, like 100% offset accounts or the ability to make extra repayments. But some do, so it's worth comparing.
Why you can trust Finder's home loan experts
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More questions about fixing your home loan rate for 4 years
Most fixed rate loans don't let you make extra repayments. Some do, but charge an early repayment fee, while other loans limit the extra amount you can repay (usually to around $15,000 a year).
If you want to pay off your loan faster, you should get a loan with an offset account or find a loan with unlimited extra repayments. This is probably a variable rate loan.
If your only concern is getting the lowest rate possible, you've missed your chance with a fixed rate. Rates have been rising since May 2022, and fixed rate loans are now higher than variable rate loans.
This is true for all fixed rate loans, including 4-year fixed rates. If your reason for fixing is to get the lowest rate, you're better off going with a competitive variable rate loan.
It's hard for the average person to understand interest rate moves. Lenders and banks are largely free to set their own rates on home loans, but they are guided by the broader economy and how easy (and cheap) it is for them to borrow the money to fund home loans.
The Reserve Bank of Australia also plays a big role. The bank sets the official cash rate, which sets a benchmark for the cost of institutions to lend and borrow money. When the cash rate goes up, lenders raise variable interest rates for borrowers. But they also start to raise fixed rate loans for new customers.
Follow Finder's monthly cash rate predictions to find out where the experts think rates are heading.
A split rate loan allows you to divide your loan into fixed and variable rate portions. This means you can lock in 50% of your loan for 4 years and have the remaining 50% on a variable rate.
A split rate lets you have the best of both worlds and is a way of hedging your bets if you're concerned about rate rises but still want the extra features and repayment options on a variable rate loan.
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To make sure you get accurate and helpful information, this guide has been edited by David Gregory as part of our fact-checking process.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio
Richard's expertise
Richard has written 530 Finder guides across topics including:
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You pay nothing. Finder is free to use. And you pay the same as going direct. No markups, no hidden fees. Guaranteed.
You save time. We spend 100s of hours researching home loans so you can sort the gold from the junk faster.
You compare more. Our comparison tools bring you cheaper, better home loans from across the market.