Large numbers of borrowers will soon be coming to the end of their fixed-rate period, with Commonwealth Bank alone revealing that $44 billion of fixed loans will expire this year, according to Canstar.

Some media reports have suggested that borrowers in that situation should be worried because their new variable interest rate is likely to be higher than their current fixed rate, or the so-called ‘fixed rate cliff’.

Being prepared and having a plan can help you navigate a suitable loan solution and competitive rate, no matter the market.

If your fixed mortgage is about to expire, here are four reasons not to panic:

  1. When you took out your home loan, the lender wouldn’t have approved your application unless it believed you could still repay your loan if interest rates increased
  2. While no one likes paying higher interest rates, they’ll continue to be low by historical standards even if they rise by two percentage points over the next couple of years
  3. If you budget for higher interest rates now, you’ll be prepared when they do increase
  4. When your fixed-rate period comes to an end, you can ask your broker to refinance you to another lender offering a comparable loan with a lower interest rate

Many homeowners are currently looking to lock in lower rates amongst speculation of future rate rises.

What happens if interest rates have increased and your fixed period ends?

Generally, when your fixed-rate period ends on your fixed-rate mortgage, your loan will be subject to the current standard variable rate of the lender.

Variable rates are just that, variable. In a market where rates are going down, you may not want to wait for the rates to go down before fixing a new rate for your loan.

This strategy comes with the risk that rates may go up whilst you are subject to variable repayments.

In a market where rates are rising, many mortgage holders aim to lock their loan at a lower interest rate; this fixed-rate period can vary depending on the loan offer at the time of writing the loan.

What should you do when the fixed term ends?

Depending on the terms of your current loan, your fixed period ending may provide the opportunity not only to change rates but also to change your loan structure to a more suitable solution. If your fixed term is coming to an end, it pays to do your research and understand your options and how they will affect your financial position.

1. Refinance your mortgage

If you are coming off a fixed-rate term, you may take the opportunity to refinance. Consider different loan structures and what may suit you as circumstances change:

  • Perhaps you would like to access your equity?
  • Would an Offset or Redraw facility be beneficial?
  • Would restructuring to a split-rate loan to be able to lock in rates but have the flexibility for additional repayments suit your lifestyle?

Everyone’s needs are different, so understanding what will make your loan work for you is crucial.

2. Refix your current home loan

Refixing your home loan is locking in another fixed rate term with your current lender. You will likely be refixing your interest rate based on the current market rates, meaning the fixed rates you previously paid will be updated in line with the current market.

3. Revert to a variable interest rate

When your fixed-rate period ends, you are generally moved to the lenders’ standard variable loan rates. If you don’t review and update your loan, your payments will be subject to the standard variable rate, which could be higher or lower than your fixed rate, depending on the market at the time the rate was locked in and when the rate expires.

Is there a penalty for breaking a fixed-rate home loan?

You may be subject to early payment, break costs or other fees if you exit your loan before your fixed rate period has expired. These vary between lenders and the loan contract.

If you are subject to fees, the amount you be charged will generally take into account your:

  • Total loan term
  • Loan length remaining on your fixed loan contract
  • The total value of the loan
  • The interest rate that you fixed at
  • Current fixed interest rates on offer from that lender

If you are choosing to break your fixed loan, it is recommended that you understand the total cost of changing lenders to help you decide on the most suitable option.

What do I need to do to review my home loan?

Speak to your Mortgage Broker about a review of your home loan. We will need some information from you, similar to when you first secured your loan. This includes details on your property, your income, assets and debts.

We can help you understand your loan options and create personalised solutions. Being prepared can remove the stress of refinancing your loan and ensure you aren’t surprised by your new rates when your fixed period ends.

Speak to an expert on fixed rate mortgages

If you would like to review your Home Loan options, contact our award-winning team to talk you through your options. We specialise in creating personalised loan solutions tailored to your financial goals at a competitive rate!

Depending on the terms of your current loan, refinancing your property may provide the opportunity not only to change rates but also to change your loan structure to a more suitable solution.


Terms are subject to approved persons only. This information is true and correct as of 5/05/2022.  All of the content above is general in nature and may not suit your personal needs, situation objective & goals.