5-year fixed rate home loan rates in Australia
With a 5-year fixed rate home loan you'll know exactly what your repayments are every month, for half a decade. But if you need to exit the loan early you'll pay a hefty break fee.
Compare 5-year fixed rate home loans
How do 5-year fixed rate home loans work?
- With any fixed rate home loan your interest rate won't change during the initial fixed period of the home loan. The fixed period is usually between 1 and 5 years.
- After that the loan reverts to a variable interest rate for the remainder of the loan. Most Australian home loans have 30-year terms and the majority of borrowers have variable rate home loans.
- A 5-year fixed rate loan is a relatively long time to fix your interest rate.
Other fixed rate periods
Most lenders offer fixed rates between 1 and 5 years. Learn more about different fixed periods with these guides:
5-year fixed rate loan example
You are looking to buy a $750,000 home. You've saved up a 20% deposit and so you need to borrow the remaining $600,000.
You apply for an owner-occupier home loan with a 30-year loan term. It's a 5-year fixed interest rate of 6.40%.
This means that for the first 5 years of the loan your monthly repayment is $3,754, every single month.
After the 5-year fixed period the loan reverts to your lender's standard variable interest rate. Given that it's quite hard to forecast rates that far ahead, it's impossible to know what that future rate will be.
What happens at the end of a 5-year fixed rate home loan?
Once the fixed period on a home loan ends the loan reverts to a variable interest rate. This will usually be a lower rate than the previous fixed rate.
You don't have to do anything when your 5-year fixed period is over. You just keep making repayments at the new rate.
But it's worth checking that you can't get a better rate, either from your current lender or by refinancing the loan.
Is it a good idea to get a 5-year fixed rate mortgage?
Most borrowers don't want to fix their rate for 5 years. It's too long. The interest rate is higher and the break fee is also quite high if you need to sell, refinance or pay off the loan early.
Why some borrowers fix for 5 years
- Your repayments won't change. Some borrowers value certainty and the ability to budget more than getting a lower rate.
- Forget about rate rises. You don't have to worry about rising interest rates and you can plan ahead.
Why most borrowers don't fix for 5 years
There are a couple of downsides to fixing for a long time that put off many borrowers:
5-year fixed loans have higher rates
Longer-term fixed rate loans have higher interest rates. 5-year fixed rate home loans are therefore the most expensive fixed rate options.
Compare some of the market's lowest rates and see how fixed and variable rates stack up.
Expensive break costs
Breaking a fixed rate loan early can cost your lender. That's why there's a break fee involved. Lenders calculate this cost based on various factors, including the amount of time remaining on your loan's fixed period.
This is why a 5-year fixed rate loan is riskier. By locking in your rate for so long a break fee is going to cost you much more, especially early in the loan.
Fewer loan features
Fixed rate home loans are less likely to come with the most useful mortgage features, such as:
- 100% offset accounts
- Extra repayments
- Redraw facilities
What kind of borrower is a 5-year fixed rate loan suitable for?
While less popular, there are some borrowers who might see value in locking in their rate for half a decade.
A 5-year fixed rate is suitable for borrowers who:
- Have fluctuating income or simply want to budget their repayments exactly and forget about changing rates.
- Are confident they won't need to sell their property or pay off the loan in the next few years.
- Think interest rates will continue rising for the next few years.
On that last point, it's pretty hard for the average borrower to time the market on rate rises. "You only ever fix it if it makes you feel more comfortable," says mortgage broker Josh Bartlett. "It's not about beating the banks."
A 5-year fixed rate is not suitable for borrowers who:
- Want the lowest interest rate
- Want to make extra repayments on their loan
- Want an offset account
- Want to pay off their loan early
Are 5-year fixed rate loans higher than variable rate loans?
Yes. 5-year fixed rate loans typically have the highest interest rates compared to other fixed rate loans and variable rate loans.
The cheapest interest rates on the market are all variable rate home loans.
You can see the current difference between fixed and variable rates on our average interest rates guide.
How do I compare 5-year fixed rate home loans?
To make sure you get a great deal on a 5-year fixed rate loan, pay attention to the rate, the fees and the loans' features.
Focus on the following:
Get a lower rate
Even if fixed rates are higher than variable rates, it's important to compare multiple 5-year fixed rates to find a good deal. Why pay more interest for no reason?
Get a loan with low fees
A lower interest rate is more important, but the lower the fees the cheaper the loan will be.
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
Frequently asked questions about fixing your home loan rate for 5 years
More guides on Finder
The best standing desk in Australia: Our top choice of the year
If you're looking for a standing desk for the home office, the Omnidesk Ascent is our #1 choice for 2023.
Fast NBN plans are now cheaper. Is it worth switching?
It's time to sort out your NBN plan for the new year.
Save $1,583 a year by using index funds instead of active trading | Dollar Saver tip #60
Invest in an index fund instead of actively trading stocks and you not only save on time and fees, you could be earning more in returns too.
5 perks you can score by upgrading your internet this year
SPONSORED: Upgrade your internet before the end of 2023 and get ahead on your life admin! We take a look at some of the benefits of a faster internet connection.
Aussies are struggling to save money, and Gen Z blame themselves
Young Australians cite overspending as the main reason for not reaching their financial goals.
Shein IPO: How to invest in the Shein IPO
What you need to know about investing in Shein from Australia.
Best places to exchange currency in Brisbane
Your guide to currency exchange in Brisbane, including how to get the best exchange rate.
Waiting for rates to fall? Don’t bank on it, says ANZ CEO
Addressing speculation that interest rates might fall in late-2024, ANZ CEO Shayne Elliott said he thought it was too optimistic.
Find the right home loan now
Sign up for our FREE 8-week course to get on the property ladder.