Fixed Rate Home Loans
A fixed rate home loan locks your interest rate, and your repayment amount, for a set period, typically one to five years. In exchange for that certainty, you give up some flexibility.
How a fixed rate home loan works
You agree to a fixed rate for a chosen term. During that period, your rate won’t move regardless of what happens to the RBA cash rate or the broader market. Once the fixed term ends, the loan typically reverts to the lender’s standard variable rate unless you choose to fix again.
What you gain
- Repayment certainty. Your minimum repayment stays the same for the whole fixed term, useful for tight household budgeting.
- Protection from rate rises. If rates increase during your fixed period, you’re insulated from that increase until the term ends.
What you give up
- No benefit if rates fall. You keep paying your fixed rate even if variable rates drop below it during your term.
- Capped extra repayments. Most lenders cap additional repayments during the fixed period, often between $10,000 and $30,000 a year, with break costs applying if you exceed the cap.
- Limited or no offset and redraw. Many fixed loans restrict these features, or don’t offer them at all.
- Break costs on early exit. Refinancing, selling, or paying off the loan early during the fixed term can trigger a break cost, which can be significant if market rates have moved since you fixed.
Who a fixed rate suits
- Borrowers who want predictable repayments for budgeting
- Anyone expecting rates to rise during their planning horizon
- Borrowers unlikely to need large extra repayments or early access to redrawn funds during the fixed term
Choosing your fixed term
Shorter terms (one to two years) give you more flexibility to reassess sooner, but expose you to rate uncertainty again relatively quickly. Longer terms (four to five years) offer extended certainty but lock in today’s assumptions about where rates are heading for longer.
A middle option
If you’re not ready to commit your whole loan to a fixed rate, a split loan lets you fix part of it and leave the rest variable.
FAQ
Your loan typically reverts to the lender’s standard variable rate automatically, unless you contact them beforehand to fix again or refinance elsewhere.
Usually yes, but within a capped limit set by the lender. Exceeding that cap can trigger a break cost, check your specific loan’s terms before making large extra repayments.
It can be. Break costs are calculated based on how much rates have moved since you fixed and how much time remains on your term, they can range from minimal to several thousand dollars depending on your circumstances.