What is a home loan interest rate lock? | Finder

Home loan interest rate lock

Avoid losing out on a great rate with a rate lock and save over the life of your loan.

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Rate lockImagine comparing home loans and finally settling on the perfect loan with the right combination of fees, features and interest rates. You fill out your application and submit it, hopeful that the rate you’ve applied for won’t change in the time it takes for your loan to settle. And then your lender raises your rate. That's where a rate lock comes in handy.

A rate lock guarantees that you will receive the loan rate under the conditions that were advertised at the moment you applied for a loan. It usually covers you from rate changes for up to 90 days until settlement date. Using a rate lock means you can avoid the surprise of receiving a rate different to the one you applied for.

Rate locks are generally only offered on fixed rate home loans.

How does a rate lock work?

A rate lock is usually applied before a fixed rate home loan settles as it sometimes may take a certain time to process your home loan application. Once you lock in the rate, depending on the lender and the rate lock available, the rate you apply for will be locked in for up to 90 days before your loan settles.

There’s usually a fee for this, and if during the rate lock period rates go down, most lenders will allow you to enjoy the lower rate - although you’ll still have to pay the rate lock fee. Some rates may be locked in at settlement, and with others it’s when the application is

Case study

Susan has been looking for her dream house for quite some time and finally has found one that suits her and her young family. Her husband and children are also thrilled with the idea of moving into a better, larger and more comfortable home that has a pool and a nice garden.

She has applied for a fixed home loan with a rate of 4.50% fixed for three years, so she can create an accurate budget during this time. She decided that it would be wise to get a rate lock as well.

Some time after submitting the application, the rate for her loan rises to 4.65%. Because of her rate lock she has avoided a rate hike of 0.15%, meaning she is now saving more money on repayments each month.

Pros and cons of a rate lock

Pros

  • No surprises. You can apply for a fixed rate home loan and not worry about rates rising before your loan is approved.
  • If rates drop you can still benefit. If during the rate lock period rates drop, many lenders will still allow you to benefit from the lower rates. As always, check the terms and conditions.

Cons

  • Rate lock fees. Rate locks can cost between $300 to $750 and in some cases even more, so be sure to shop around, and try to get an idea of whether or not rates will be rising or falling so you know whether it’s worth the fee.

Things to consider about rate locks

When considering buying a home with a fixed rate home loan and using a rate lock, you should consult a financial planner or mortgage broker first. These kinds of professionals can tell you more about the prices on the market and will be able to tell you whether the rates might drop or rise in the short term.

You should note that even with the best experts, it’s difficult to forecast where rates might be over the course of a year or even a month.

Also keep in mind that some fixed rate home loans have a free rate lock. Free rate locks are usually shorter than rate locks with fees, generally lasting for 60 days as opposed to 90 days. Still, a free rate lock could save you hundreds of dollars and guarantee that you receive the rate you apply for.

FAQ about rate locks

How long will the rate lock last for?

You can usually lock a rate in for 90 days before your loan settles.

What loans qualify for a rate lock?

A rate lock is generally only applicable on fixed rate home loans.

What if rates go down during the rate lock period?

Most lenders will enable you to enjoy the lower rates; however you will still have to pay the rate lock fee.

Compare fixed rate home loans

Data updated regularly
$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
HSBC Fixed Rate Home Loan Package
1.88%
2.86%
$0
$390 p.a.
80%
$546.6
$3,288 refinance cashback offer
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.
UBank UHomeLoan Fixed
1.75%
2.22%
$0
$0 p.a.
80%
$537
This very low fixed rate is only available until 29 April 2021. Other conditions apply. A competitive fixed rate loan with no ongoing fees. Requires a 20% deposit
Westpac Fixed Option Home Loan Premier Advantage Package
1.89%
3.46%
$0
$395 p.a.
95%
$547.35
Up to $3,000 refinance cashback.
Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
AMP Bank Professional Package Fixed Loan
1.99%
3.1%
$0
$0 p.a.
80%
$554.81
Get a low fixed rate package with no application or settlement fee, that's available with a 20% deposit. Other fees and charges apply.
Suncorp Home Package Plus Fixed
1.89%
2.85%
$0
$0 p.a.
80%
$547.35
Lock in a low fixed rate loan for two years and get the annual package fee waived in the first year. Available for borrowers with 20% deposits.
Well Home Loans Balanced Fixed Home Loan
1.89%
2.18%
$250
$0 p.a.
90%
$547.35
Owner occupiers can get a sharp fixed rate for the first year, plus an offset account. Available with a 10% deposit.
Macquarie Bank Basic Fixed Home Loan
2.09%
2.43%
$0
$0 p.a.
70%
$562.33
Get a low interest rate and a mortgage with flexible, basic features. No application or ongoing fees. Requires a 30% deposit. Refinancers can switch with a convenient digital application.
Virgin Money Reward Me Fixed Rate Home Loan
2.04%
2.79%
$300
$10 monthly ($120 p.a.)
80%
$558.56
$3,000 refinance cashback.
Buy your home and lock in a low rate for the first two years. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 27 February 2021 and settle by 27 August 2021.
loans.com.au Fixed
1.99%
2.7%
$0
$0 p.a.
80%
$554.81
Home buyers can lock in this low fixed rate for two years. This loan also allows extra repayments. Requires a 20% deposit.
Well Home Loans Balanced Fixed Home Loan
1.95%
2.17%
$250
$0 p.a.
90%
$551.82
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
St.George Fixed Rate Advantage Package
1.94%
3.21%
$0
$395 p.a.
80%
$551.07
Up to $4,000 refinance cashback
Lock in a very low rate for four years. Requires a 20% deposit. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
UBank UHomeLoan Fixed
2.24%
2.33%
$0
$0 p.a.
80%
$573.72
A five year fixed rate offer with no ongoing bank fees.
BankSA Advantage Package Fixed Home Loan
1.99%
3.26%
$0
$395 p.a.
$554.81
Up to $4,000 refinance cashback
A competitive fixed rate loan. Refinancers borrowing $200,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
ME Flexible Home Loan Fixed with Members Package
1.99%
3.33%
$0
$395 p.a.
80%
$554.81
Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.
St.George Fixed Rate Advantage Package
1.84%
3.38%
$0
$395 p.a.
80%
$543.64
Up to $4,000 refinance cashback
Borrowers with 20% deposits or equity can get this competitive fixed rate loan. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Well Home Loans Balanced Fixed Home Loan
2.24%
2.27%
$250
$0 p.a.
90%
$573.72
A 2 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee. Not available for construction purposes.
Bank of Melbourne Advantage Package Fixed Home Loan
1.84%
3.38%
$0
$395 p.a.
80%
$543.64
Up to $4,000 refinance cashback
Get a competitive home loan rate for two years. Requires at least a 20% deposit. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
IMB Fixed Rate Home Loan
1.97%
2.81%
$449
$6 monthly ($72 p.a.)
95%
$553.31
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online. Available with a 10% deposit.
UBank UHomeLoan Fixed
2.14%
2.71%
$0
$0 p.a.
80%
$566.11
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Bank of Melbourne Advantage Package Fixed Home Loan
1.94%
3.21%
$0
$395 p.a.
80%
$551.07
Up to $4,000 refinance cashback
Lock in a low fixed rate loan for four years. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Well Home Loans Balanced Fixed Home Loan
2.04%
2.17%
$250
$0 p.a.
90%
$558.56
A low 3 year fixed rate for home buyers. Add a 100% offset account with a $10 monthly fee. Not available for construction purposes.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
2.28%
3.84%
$0
$395 p.a.
95%
$576.78
$2,000 refinance cashback
Enjoy a competitive rate with no application fee for this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
ME Flexible Home Loan Fixed with Members Package
2.09%
3.27%
$0
$395 p.a.
80%
$562.33
Get a low 3 year fixed rate with a 100% offset account and package discounts.
UBank UHomeLoan Fixed
2.14%
2.35%
$0
$0 p.a.
80%
$566.11
A one year fixed rate offer with no ongoing bank fees.
BankSA Advantage Package Fixed Home Loan
1.89%
3.43%
$0
$395 p.a.
80%
$547.35
Up to $4,000 refinance cashback.
Fix to a low rate for two years and forget about rate rises. Refinancers borrowing $200,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Macquarie Bank Basic Fixed Home Loan
2.19%
2.53%
$0
$0 p.a.
80%
$569.91
Borrow up to $750,000 with this basic 3 years fixed rate home loan. Refinancers can switch with a convenient digital application.
UBank UHomeLoan Fixed
1.99%
2.33%
$0
$0 p.a.
80%
$554.81
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
Well Home Loans Balanced Fixed Home Loan
2.29%
2.29%
$250
$0 p.a.
90%
$577.55
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee. Not available for construction purposes.
Newcastle Permanent Building Society Real Deal Home Loan
2.59%
2.63%
$595
$0 p.a.
80%
$600.83
$2,000 refinance cashback
$2,000 cashback for eligible refinancers borrowing $250,000 or more.
IMB Fixed Rate Home Loan
2.49%
3.36%
$449
$6 monthly ($72 p.a.)
90%
$593.01
NSW and ACT customers only. A 3 years fixed rate investor which allows extra repayments to be made.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
2.48%
3.68%
$0
$395 p.a.
95%
$592.23
$2,000 refinance cashback
A two year fixed rate home loan with no application fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Westpac Fixed Option Home Loan Premier Advantage Package
1.99%
3.29%
$0
$395 p.a.
95%
$554.81
Up to $3,000 refinance cashback. Lock in a very low rate for four years with this owner occupier loan. Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
ME Flexible Home Loan Fixed with Members Package
2.19%
3.44%
$0
$395 p.a.
80%
$569.91
Fix your rate for the first year and take advantage of package benefits. Comes with a 100% offset account.
Heritage Bank Fixed Rate Home Loan
2.19%
4.23%
$600
$8 monthly ($96 p.a.)
95%
$569.91
Get a partial offset account and the option to make interest-only repayments.
UBank UHomeLoan Fixed
2.09%
2.6%
$0
$0 p.a.
80%
$562.33
Pay no ongoing fees on this investment loan fixed for 3 years.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
2.48%
3.77%
$0
$395 p.a.
95%
$592.23
$2,000 refinance cashback
Enjoy a discounted fixed rate and the ability to package the loan with other financial products. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
ME Flexible Home Loan Fixed
2.64%
4.65%
$0
$0 p.a.
80%
$604.76
Lock in a competitive rate for 2 years, unlock package discounts and use a 100% offset account to minimise interest payments.
UBank UHomeLoan Fixed
2.09%
2.3%
$0
$0 p.a.
80%
$562.33
A competitive 3 year fixed rate with no ongoing bank fees.
IMB Fixed Rate Home Loan
2.09%
2.9%
$449
$6 monthly ($72 p.a.)
95%
$562.33
NSW and ACT customers only. Lock in a low fixed rate for two years. Available with a 5% deposit.
Newcastle Permanent Building Society Fixed Rate Home Loan
2.58%
3.99%
$595
$0 p.a.
95%
$600.05
$2,000 refinance cashback
Borrow up to 95% LVR of the value of the property you're buying and pay no ongoing fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Heritage Bank Advantage Package Fixed
2.39%
3.15%
$0
$350 p.a.
95%
$585.25
Get a partial offset account and flexible repayments with this package loan.
UBank UHomeLoan Fixed
2.24%
2.64%
$0
$0 p.a.
80%
$573.72
Pay no ongoing fees on this investment loan fixed for 3 years.
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2 Responses

    Default Gravatar
    PeterFebruary 20, 2018

    Do I need to pay rate lock if it goes over 90 days and I am unable to settle the property?

      Avatarfinder Customer Care
      MayMarch 12, 2018Staff

      Hi Peter,

      Thanks for your question.

      Locking your home loan interest rate usually comes with a fee. So if you’ve applied for it, yes, you still have to pay the fee even when you’re unable to settle your loan/it goes over 90 days. Contacting your lender directly is also best so they may be able to advise as to how much and when would the fee be charged.

      Cheers,
      May

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