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What happens when my fixed rate ends?

When your fixed rate period ends you move to a variable rate home loan. If you fixed when rates were low, you could end up on a much higher rate.

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:

  1. 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.
  2. 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.
  3. 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 2-year fixed rate loan:

  • Interest rate: 2.20%
  • Loan amount: $400,000
  • Loan term: 30 years
  • Loan type: Owner-occupier, principal-and-interest repayments
  • Your monthly repayment = $1,519

Now the 2 years have passed and your loan reverts to your lender's current variable interest rate.

Your new variable rate loan:

  • Interest rate: 4.75%
  • Loan amount: $400,000
  • Loan term: 30 years
  • Loan type: Owner-occupier, principal-and-interest repayments
  • Your monthly repayment = $2,087

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:

  1. 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.
  2. 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.
  3. 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

Finder survey: How many Australians know what their current home loan interest rate is without checking?

Source: Finder survey by Pure Profile of 1112 Australians, December 2023

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.

Read more about the differences between fixed and variable interest rate loans.

More questions about fixed rate loans

More guides on Finder

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