What happens when your fixed rate ends
When a fixed rate home loan expires it rolls onto the lender's revert rate, a variable rate that is usually higher than what new customers are offered. You have four options and about 90 days to use them well. Here is what changes, how much repayments move, and when to start.
- Your loan rolls onto the revert rate automatically; nothing else about the loan changes
- On a $600,000 loan, moving from 5.0% fixed to a 6.5% revert rate adds about $570 a month
- Four options: refix, stay variable and negotiate, split, or refinance
- Start 60 to 90 days before expiry and time settlement for just after it, so there is no break cost
- Your lender will usually match a competitor’s written offer rather than lose the loan
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees, or other loan amounts might result in a different comparison rate. Comparison rates are based on a secured loan of $30,000 over 5 years for vehicle finance and $50,000 over 5 years for equipment finance, as required under the National Credit Code.
What happens when a fixed rate home loan ends?
On the expiry date the fixed rate stops and the loan moves to the lender's revert rate. This is automatic; you do not need to sign anything and the lender does not need your permission. The loan, the remaining term and the lender are unchanged. What changes is the interest rate, and with it the repayment.
The revert rate is set by the lender and is usually a "standard variable" rate that sits well above the discounted rates the same lender advertises to new customers. That gap, not the movement in market rates, is why the repayment shock at the end of a fixed term is often larger than people expect. The one piece of good news is that once the fixed period has expired there is no break cost, so you are free to move.
How much will my repayments go up?
It depends on the gap between your fixed rate and the revert rate. On a $600,000 loan with 30 years to run, repayments at 5.0% are about $3,220 a month. At a 6.5% revert rate they are about $3,790, an increase of roughly $570 a month or $6,800 a year. On a $400,000 loan the same rate move adds about $380 a month. Your lender's letter will state the exact revert rate; the refinance calculator shows what a lower rate would do to the figure.
Your four options
- Refix with your current lender. Simplest and fastest. Ask for their current one- to five-year fixed rates and compare with the market before accepting. A new fixed period restarts the break-cost clock, so fix only for as long as you are sure you will keep the loan.
- Stay variable and negotiate. Ask the retention team for their best variable rate for existing customers. Come armed with a competitor's written offer; most lenders will move rather than lose the loan. No fees, no paperwork, done in days.
- Split the loan. Fix part and leave part variable. You get some certainty on the fixed portion and offset or extra repayments on the variable portion. Useful if you cannot decide which way rates are heading.
- Refinance to another lender. The most work and the biggest potential saving, especially if your lender's retention offer is weak. Typical cost is $500 to $1,500, often covered by a cashback. Time settlement for just after the expiry date and there is no break cost.
When should you start?
Sixty to ninety days before the expiry date. A refinance takes two to four weeks from application to settlement, and pre-approval is valid for about 90 days, so applying six to eight weeks out lets you settle within days of the fixed rate ending. Start earlier if you are self-employed or your situation has changed since the loan was written, because the new lender will assess you afresh.
Your lender will usually write to you 30 to 60 days before expiry with the revert rate and a refix offer. Treat that letter as the starting point for a negotiation, not the offer to accept. The refix rates in it are rarely the lender's best.
Can you refinance before the fixed rate ends?
Yes, but breaking a fixed rate early triggers a break cost. If rates have risen since you fixed, the break cost is usually small or nil and switching early can make sense. If rates have fallen, the break cost can be large, and the answer is almost always to wait. Ask your lender for a written break cost quote, which is free, and compare it with the saving. The costs guide explains how break costs are calculated.
Will your bank offer a better rate to keep you?
Usually, if you ask. Retention teams exist because winning a new customer costs a lender far more than keeping an existing one. The lever is a written offer from another lender: with one in hand, ask your bank to match it. If they do, you have saved the switching cost. If they will not, you have already done most of the work to move.
What if you cannot afford the new repayments?
Talk to your lender before you miss a payment, not after. Every lender has a hardship process that can extend the loan term, move you to interest-only for a period, or pause repayments while you sort things out. A broker can also check whether another lender would assess you on a lower repayment. If you want independent advice first, the National Debt Helpline on 1800 007 007 is free.
Keep reading
The rest of the refinancing guide.
Fixed rate expiry FAQs
What happens when my fixed rate home loan ends?
Should I refinance before my fixed rate ends?
How long before my fixed rate ends should I start?
What is a revert rate?
Can I refix with my current lender?
What if I cannot afford the higher repayments?
Fixed rate ending in the next 90 days?
Answer a few quick questions and a licensed broker partner will compare your lender's refix offer against the market, with settlement timed to avoid break costs. Free, no obligation.