Fixed interest rate home loans have a built-in end point. This is typically between 1 and 5 years. After that, your loan reverts to a variable interest rate. This leaves you with 3 options:
Do nothing. Your loan reverts to a variable rate. You check the new rate, decide it's fine and stay with it. You don't have to do anything.
You find a better deal and refinance. If you're not happy with the new rate then you can compare rates and refinance your mortgage.
You fix your rate again but stay with your lender. It's possible to lock in a new fixed rate term with your lender. But it won't be the same interest rate as before.
Fixed rate ending soon?
Interest rates are much higher now than they were just a couple of years ago. If your fixed rate is about to end you could be in for a shock. Check current rates and use a mortgage calculator to see how much a higher rate will impact your repayments.
1. Your loan reverts to a variable rate
If your fixed rate ends and you do nothing, your lender simply moves you to a variable rate loan.
Let's say you locked in a 2-year fixed interest rate exactly 2 years ago. You got a great deal back then when all interest rates were very low.
Your new loan has a much higher interest rate (because interest rates have risen a lot since you fixed). Now you're paying $568 a month more than before.
Why are interest rates higher now?
Interest rates were very low for many years. The Reserve Bank of Australia (RBA) kept the official cash rate target at just 0.10% for many months. This made it cheaper for banks to borrow and lend money, which benefited borrowers and stimulated economic activity (and soaring house prices).
You don't have to do anything now except make sure you can afford the repayments. But it's a really good idea to compare interest rates from other lenders to make sure you're getting a good deal.
Some lenders were offering fixed rates below 2.00%.
But in 2023 things are very different. The RBA is trying to keep inflation down. To do this it has increased the cash rate multiple times, driving interest rates up to levels not seen in a decade.
If you locked in a fixed home loan rate when rates were low, well done. You got a great deal. But what goes down must go up.
2. You find a better deal and refinance
The end of a fixed rate period is a good time to think about switching, especially if your lender isn't giving you a good deal on your new variable rate.
Here's what you need to do:
Check your new rate and compare it to other rates on the market. Compare rates from various lenders and see if your new rate stands up.
Before you switch, check your lender's website. You might be surprised to learn that your lender actually is offering a really good rate for new borrowers while leaving you on a higher rate. Call your lender up and ask it to give you its lowest rate.
If you think you can get a better deal elsewhere, refinance.Refinancing your home loan means applying for a new loan. Once approved you discharge the old one and begin the new one
3. You get a new fixed rate term with your lender
Most lenders will let you lock in a new fixed rate. This is definitely an option for borrowers who value the certainty of fixed repayments over anything else or are worried about future rate rises.
Just keep in mind that if you fix your rate in today's market, the rate will be much higher than the fixed rate you could have got between 2019 and 2021.
But even if you really want a fixed rate home loan, you could still find a better option by comparing fixed rate home loans.
Should I fix my rate now or is variable a better option?
If your main concern is getting the lowest possible rate, a variable rate loan is going to be cheaper now.
For a period between 2019 and 2021 fixed rates were often even lower than variable rates. But that was unusual.
Fixed versus variable
Variable rates are usually lower than fixed rates and are easier to refinance or pay off early (no break fees). But your rate can go higher if rates rise (like they did in 2022).
Fixed rates offer more certainty and make it easier to budget. They tend to be higher and more expensive to exit or refinance early.
Finder survey: How many Australians know what their current home loan interest rate is without checking?
Response
Yes
58.59%
No
41.41%
Source: Finder survey by Pure Profile of 1112 Australians, December 2023
More questions about fixed rate loans
You can break a fixed rate home loan early. This can happen because you want to repay the loan early or because you're refinancing to a new loan. You can do it, but there's a fixed rate break fee involved. The break fee can cost hundreds or even thousands of dollars, depending on how long is left on your fixed rate period and other factors.
It's hard to time the market when fixing your rate. Some borrowers locked in very low rates in the last few years but right now, you will almost certainly have a higher rate if you fix. But fixed rates are not just about locking in a good deal. It's about certainty, knowing what your repayments will be and knowing they won't change for a while. For some borrowers that's worth being on a higher interest rate.
No. Fixing again requires fixing at current market rates. And these change all the time as lenders adjust pricing based on the cost of accessing money to fund home loans. It's highly unlikely you could get the same rate you fixed at, or similar, in today's market.
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 558 Finder guides across topics including:
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