A fixed rate mortgage holds your interest rate steady for an agreed period, usually one to five years in Australia. Your scheduled repayments stay the same during that period, even if the cash rate rises. The trade-off is less freedom to repay extra, refinance or use an offset account.
How an Australian Fixed Term Works
The fixed term is one part of your home loan's life. A loan might run for 30 years while its rate is fixed for only two years. When the fixed term ends, the remaining balance normally moves to the lender's applicable variable rate unless you arrange another option.
Australian fixed periods usually run for one to five years. Decade-long fixes are rare, and a thirty-year fixed rate is not a standard Australian home loan product. Compare the fixed period with how long you expect to keep the property and loan.
What Fixing Protects and What It Costs
Fixing protects your scheduled repayment from interest-rate increases during the fixed term. It also means a fall in market rates does not automatically reduce your fixed rate. Payment certainty comes with contractual limits.
- Extra-repayment caps limit how much you can pay above the required repayment without a charge. Match the allowance to expected savings, bonuses or sale proceeds.
- Break costs can apply if you refinance, sell or repay the fixed loan early. These costs reflect the lender's funding or hedging loss under its formula, not a standard flat penalty.
- Offset access on fixed portions is limited. Some products have partial offset, while others have none, so check how much interest your savings would actually save.
Request a written break-cost quote before committing to an early exit. The figure can change with wholesale rates, the remaining fixed term and the amount repaid. A lower advertised rate elsewhere can still leave you worse off after exit costs.
Locking the Fixed Rate Before Settlement
A pre-settlement rate lock secures the rate before the loan funds. The fixed term controls the rate after funding. Choosing a fixed product on your application does not, by itself, lock the rate.
A lender can charge a separate, non-refundable rate-lock fee. For example, CommBank's fixed-rate terms list a $750 fee for a 90-day lock on eligible new applications. Its Rate Lock form says the period begins when the request is processed.
Compare the expiry with a realistic settlement date before paying. Allow for valuation delays and conveyancing problems, including a seller needing more time. A lock that expires before settlement can leave you exposed to the rate applying when the loan funds.
Establish the cost of an extension before relying on one. CommBank's form says its lock cannot be extended. A new lock requires another fee and uses the then-current reference rate.
Obtain written confirmation of the locked rate, the fee and the expiry date. Keep the accepted request with your loan documents so the lender's confirmation, rather than the application selection, establishes the lock.
Fixed Versus Variable Versus Split
Choose a fixed rate for repayment certainty, a variable rate for flexibility or a split when you need some of each. The Reserve Bank's cash rate influences lending conditions, but a cash-rate change never alters a repayment already fixed.
A variable-rate home loan can become cheaper or more expensive as the lender changes its rate. Variable products generally give borrowers more room for extra repayments and offset savings. Fixed products trade some of that flexibility for a known repayment.
- If you expect to sell or refinance during the fixed term, include potential break costs in the comparison.
- Compare the lender's standard variable revert rate with available alternatives. A low introductory fixed rate does not establish the cost after expiry.
- Check offset and redraw access for each fixed portion. An extra-repayment allowance does not guarantee you can redraw that money.
- For a household budget test, calculate today's variable repayment at an interest rate two percentage points higher. For example, test a 6% rate at 8%, using the same balance and remaining loan term.
The budget test asks whether your income can absorb the higher dollar repayment after normal spending. It is separate from APRA's mortgage serviceability buffer, which requires banks to assess residential borrowing at least three percentage points above the loan rate, subject to APRA's settings.
A split home loan fixes part of the balance and leaves the rest variable. That can preserve an offset account and extra-repayment capacity on the variable portion. Each fixed portion still has its own limits and potential break costs.
When a Fixed Rate Ends
At expiry, the lender recalculates your repayment using the applicable rate and remaining loan term. A default move to variable can raise your repayment sharply, so model the change months before expiry.
The Reserve Bank estimated that 880,000 fixed-rate loan facilities would expire in 2023, explaining the scale of that year's fixed-rate roll-off.
- Ask your lender for the expected revert rate. Calculate the repayment on your projected balance and remaining term, then compare it with your household budget.
- Run a refinance review before the fixed term expires. Compare a negotiated variable rate, another fixed term and a new lender after application costs and any early-exit charge.
- Set a reminder six weeks before the revert date to confirm the selected option and required documents. Keep paying under the existing agreement until the change takes effect.
- If the model shows a shortfall, contact the lender's hardship team early. The National Debt Helpline provides free financial counselling on 1800 007 007.
For brokers, audit the loan book for fixed terms ending in the next 18 months. Record each expiry, projected revert repayment and review status. Begin with clients facing the largest repayment increase or a change in income.
Why Australia Has No Thirty-Year Fix
Australia lacks a deep, government-backed buyer of long-dated mortgage rate risk comparable to the US secondary market. A competitively priced thirty-year fix would require someone to carry that risk for decades.
Australian lenders fund and hedge shorter fixed periods instead. The loan can still have a thirty-year repayment term, but that does not guarantee its interest rate for thirty years.
Advice Conversations Worth Having Now
Before fixing, ask how the loan fits the borrower's plans through the entire fixed term. A likely move, renovation or large repayment can change whether the payment certainty is worth the restrictions.
- Diary the revert date and book a review six weeks ahead. Start the affordability modelling earlier when a large increase is likely.
- Check the extra-repayment cap and break-cost calculation against the client's actual plans. Obtain product-specific offset and redraw terms in writing.
- For investors, established dwellings held at the 2026 Budget-night cut-off keep full negative-gearing treatment, subject to normal deduction rules. From the 2027 to 2028 financial year, losses on established dwellings bought after that cut-off cannot offset salary. Deductions are limited against residential property income, with excess amounts quarantined under Schedule 2 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. The Act also allows quarantined amounts to reduce capital gains under its rules. Use the official eligibility details and the broader negative gearing explanation when modelling after-tax repayments.
The choice between structures starts with the borrower's cash flow and likely changes during the fixed term. Record why the selected term fits, what could trigger a break cost and how the household will fund the repayment after expiry.
