Fixed Rate Home Loans Australia
Quick Answer
What is a fixed rate home loan in Australia?
Your rate stays locked for 1 to 5 years
A fixed rate home loan locks your interest rate for a set period, so your repayments stay the same regardless of what the RBA or lenders do with rates. Fixed terms typically range from 1 to 5 years. When the fixed period ends, your loan rolls to the lender's variable rate unless you re-fix or refinance.
- Common fixed terms 1, 2, 3 or 5 years
- Extra repayments Usually capped
- Offset account Rarely included
- Break costs May apply if you exit early
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Two factors that shape your fixed rate home loan
The length of your fixed term
Shorter fixed terms (1 to 2 years) usually carry lower rates but expose you to rate changes sooner. Longer terms (3 to 5 years) give more certainty but typically come with a higher rate and larger break costs if you need to exit early.
Rate Risk
Flexibility and feature restrictions
Fixed rate loans restrict features that variable loans include. Most cap extra repayments, do not offer a full offset account and charge break costs for early exit. If you need flexibility, a split loan with part fixed and part variable may be a better fit.
Flexibility RiskCommon fixed rate term options
These are general guide ranges only. Rates, terms and features depend on the lender, your deposit, loan size and borrower profile.
-
1 year fixed Short lock, lower rate, re-fix sooner
-
2 year fixed Popular balance of rate and term
-
3 year fixed Most common fixed term chosen
-
5 year fixed Longest common term, higher rate
The right fixed term depends on your plans. If you might sell, refinance or make large extra repayments within the fixed period, a shorter term or split loan structure usually makes more sense.
Looking for a fixed rate home loan?
What lenders look for in a fixed rate home loan
Fixed rate home loans are assessed using the same criteria as variable rate loans. The lender reviews your income, expenses, deposit, credit history and the property you are purchasing or refinancing.
Stable income and clear ability to service repayments- Sufficient deposit or equity in an existing property
- Clean credit history with no recent defaults
- Manageable existing debts and financial commitments
- Acceptable property type and valuation support
Self-employed borrowers may need alternative income evidence. See self-employed home loans for options.
Common fixed rate loan types
Most major banks and non-bank lenders offer fixed rate options across these common loan scenarios.
Owner-occupier fixed- Investment fixed rate
- Split fixed and variable
- Interest only fixed
- First home buyer fixed
If you want to combine fixed and variable features, see our guide to variable rate home loans.
Key factors when choosing a fixed rate home loan
These factors usually determine which fixed rate product and term length suits your situation best.
01
Fixed term length
Shorter terms give you more frequent opportunities to reassess, while longer terms lock in certainty but increase break cost exposure.
02
Break cost risk
If you sell, refinance or switch during the fixed period, break costs can be significant. Factor in your plans before locking in.
03
Extra repayment limits
Most fixed rate loans cap extra repayments at $5,000 to $10,000 per year. Check this limit before you commit.
04
Revert rate
When your fixed term ends, the loan reverts to the lender's standard variable rate. Check this rate before fixing, as it may be higher than competitive variable rates.
05
Offset and redraw
Full offset accounts are rare on fixed rate loans. If offset savings matter to you, a split loan or variable loan may work better.
06
Rate lock option
Some lenders let you lock in the fixed rate at application for a fee, protecting you if rates rise before settlement. Not all lenders offer this.
Common problems with fixed rate home loans
Fixed rate loans are straightforward on the surface, but borrowers often hit these issues.
Break costs wipe out the savings
If you sell, refinance or make a large payout during the fixed term, break costs can run into thousands of dollars, sometimes exceeding any interest savings from the fixed rate.
Only fix if you are confident you will hold the loan for the full fixed period.
Rates drop after you fix
If the RBA cuts rates during your fixed period, your repayments stay the same while variable rate borrowers benefit. You remain locked in at the higher rate.
Consider a split loan to balance certainty with some variable rate exposure.
Revert rate is much higher
When the fixed period ends, many lenders roll you onto a standard variable rate that is well above their best advertised rate. This can increase your repayments significantly if you do not act before expiry.
Set a reminder 2 to 3 months before your fixed term ends to review your options.
No offset reduces your interest savings
Most fixed rate loans do not include a full offset account. If you keep large cash balances, you miss the interest reduction that an offset would provide on a variable loan.
If offset matters, consider splitting your loan so the variable portion has full offset access.
How to get a fixed rate home loan in 6 steps
Step
01
Decide on fixed, variable or split
Work out whether you want your entire loan fixed, a portion fixed with the rest variable, or full variable with offset access.
Step
02
Choose your fixed term length
Consider how long you plan to hold the property and loan. Align your fixed term with your plans to avoid break costs.
Step
03
Compare lenders and fixed rates
Fixed rates vary significantly across lenders. Compare the rate, fees, extra repayment limits and revert rate before choosing.
Step
04
Prepare your financial documents
Gather payslips, bank statements, tax returns, ID and details of any existing debts. Self-employed borrowers may need BAS or accountant letters.
Step
05
Consider a rate lock
If your lender offers a rate lock option, you can secure today's fixed rate while your application is being processed. This usually costs a small fee.
Step
06
Submit and settle
Lodge your application, respond to lender conditions promptly and prepare for settlement. Your fixed rate begins from the settlement date.
How fixed rate home loans work in Australia
A fixed rate home loan sets your interest rate at a specific level for a chosen period, typically 1 to 5 years. During this time, your repayments do not change regardless of what happens with the RBA cash rate or your lender's variable pricing. This makes budgeting easier and protects you if rates increase.
The main trade-off is flexibility. Most fixed rate products restrict extra repayments to around $5,000 to $10,000 per year. Full offset accounts are rarely available, and if you need to break the fixed term early by selling, refinancing or switching, the lender will usually charge break costs. These can be substantial, especially if wholesale rates have fallen since you locked in.
Many Australian borrowers use a split loan structure to get the best of both worlds. You fix a portion of your loan for rate certainty and keep the remainder on a variable rate with full offset and unlimited extra repayments. This reduces your break cost exposure while still giving you some protection against rate rises.
When your fixed period ends, the loan reverts to the lender's standard variable rate. This revert rate is often higher than competitive variable rates available at the time. That is why it pays to review your options 2 to 3 months before expiry and either re-fix, negotiate a better variable rate with your existing lender or refinance to a new lender.
Get help with your fixed rate home loan
Choosing between fixed and variable rates, selecting the right term length and comparing lender products can make a real difference to what you pay. A finance specialist can help you weigh up the options.
Property Finance Help connects you with finance professionals who can compare fixed rate home loans from multiple lenders.
Property Finance Help is a lead generation service, not a lender, broker, or financial adviser. All information on this website is general in nature and does not take into account your personal objectives, financial situation, or needs. Consider seeking independent professional advice before making any financial decision.
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