What is a revert rate?

A high revert rate on your home loan can give you a nasty shock. Learn how to protect yourself.

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If you’ve been combing through your home loan documents, you might have come across the term “revert rate”. Alongside this term, you’ve no doubt noticed a second interest rate that’s entirely different from the one you signed up for. Confusing, to say the least.

Let’s take a look at what this rate is exactly, and find out how it could impact you.

What is a revert rate?

A revert rate is an interest rate that fixed and introductory rate home loans reset to at the end of a predetermined term. It is generally higher than the rate you pay at the start of the loan period. Lenders often use a revert rate as a way of recouping the cost of a great deal they might offer for a certain period of time.

For instance, you might have been awarded a very low rate on your home loan for the first couple of years. During this period, your lender makes a slimmer profit on the net interest margin. This describes the difference between the interest rate you’ve been given, and the rate the bank pays to fund your loan.

Obviously, a bank wants to maximise the net interest margin of its loan book. By resetting your home loan to a higher revert rate, they widen the interest margin they make on your mortgage.

What sort of home loans carry a revert rate?

There are generally two different types of home loan products that revert rates apply to:

  • Fixed rate loans
  • Introductory rate loans

A fixed rate home loan means your interest rate won’t change for a predetermined period of time, generally between one and five years. This can work to the bank’s advantage if market rates fall during the fixed rate period, but works to your advantage if rates rise. A revert rate is one of the ways a bank mitigates this risk.

At the end of the fixed rate period, if you take no action, your loan will automatically roll over to a variable revert rate. If you’re not paying attention, this can come as a nasty shock.

An introductory rate home loan, is a variable rate home loan that offers a discount off the lender’s standard variable rate for a predetermined period of time, usually one or two years. At the end of this period, your loan could reset to the bank’s standard variable rate or to a higher revert rate.

Again, if you don’t take any action, you could end up surprised by a much higher monthly repayment.

How much higher is the revert rate from the rate I’m paying now?

The difference between the rate you’re paying and the revert rate can be pretty significant. For instance, a search of finder.com.au’s database as of November 2017 revealed the average difference between a one-year fixed rate and the revert rate is 0.69%. The average difference between a three-year fixed rate and the revert rate is 0.66%.

Suppose you were on a three-year fixed rate of 4.00% for a $500,000 loan. How would the higher revert rate affect your repayments?

    • Original rate: 4.00%
    • Monthly repayment: $2,387.
  • Revert rate: 4.66%
  • New monthly repayment: $2,581

That's an extra $194 per month. If you make repayments for 10 years at this rate you'll end up paying an extra $23,280 on your home loan.

What can I do about a high revert rate?

The best thing you can do to protect yourself from a high revert rate is to negotiate with your lender as the end of your fixed rate or introductory rate period approaches. You may be offered the opportunity to fix your rate for another term, or be able to settle on a discounted rate.

If your lender isn’t willing to negotiate, it’s time to look at refinancing. There is a plethora of great home loan deals on the market, so it’s important to compare loans as the end of your fixed or introductory period approaches.

Keep in mind, that moving to a new home loan will come with some costs. You can use the calculator on this page to crunch the numbers and make sure you’ll come out ahead if you refinance.

If you’ve checked the figures and decided to refinance, you can compare loans in the table near the top of this page. Or, if you want to learn more about the refinancing process, you can read our comprehensive refinancing guide.

Has your mortgage reverted to a sky-high rate? Compare and switch

Data indicated here is updated regularly
$
% p.a.
years
Name Product Interest Rate (p.a.) Comp. Rate^ Application Fee Ongoing Fees Maximum Insured LVR Amount Saved
St.George Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
80%
$43,171.24
Up to $4,000 refinance cashback. With this competitive variable rate loan from St.George, refinancers borrowing $250,000+ can get up $4,000 cashback and borrow up to 80% of the property's value. (Terms, conditions & exclusions apply).
Westpac Flexi First Option Home Loan
2.29%
2.72%
$0
$8 p.a.
95%
$50,287.27
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
Suncorp Back to Basics Home Loan
2.54%
2.55%
$0
$0 p.a.
80%
$43,314.23
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
Athena Variable Home  Loan
2.19%
2.19%
$0
$0 p.a.
60%
$53,040.06
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
HSBC Fixed Rate Home Loan
1.88%
2.98%
$0
$0 p.a.
80%
$61,434.54
Lock in a competitive fixed rate for 2 years and buy your home with a 20% deposit.
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Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

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Important Information*
Logo for Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.

Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Up to $4,000 refinance cashback. With this competitive variable rate loan from St.George, refinancers borrowing $250,000+ can get up $4,000 cashback and borrow up to 90% of the property's value. (Terms, conditions & exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.

Logo for Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I)
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I)

Get a competitive variable interest rate with no application fee or ongoing fees.

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