Fixed rate home loans: costs, features and repayments

A fixed rate gives you a known interest rate for an agreed period. That can make budgeting easier, especially if a repayment increase would be difficult to absorb. The trade-off is flexibility: selling, refinancing or paying a large lump sum during that period may cost you.

Start with how long you expect to keep the loan and how you use it. Then compare the fixed offer with a variable or split loan on the same balance and remaining term.

A fixed rate home loan keeps the same interest rate for an agreed period, commonly 1 to 5 years. For a standard principal-and-interest loan with an unchanged repayment schedule, that usually means a predictable repayment during the fixed period. The loan generally moves to a variable rate afterwards unless you arrange another option.

What you give up for that certainty

Extra repayments may be limited by month, fixed-rate year or the whole fixed term. Redraw and offset access vary, and changing or repaying the loan early can trigger a break cost. That is a fee the lender may charge to cover its financial loss if you change or repay the fixed loan early. It can run into thousands of dollars. Check the limits before fixing if you expect to use savings to reduce the balance.

A known rate may help during a planned period of lower income, but the repayments still need to be affordable. If you expect to sell, refinance or make large extra payments, compare a shorter term, a variable loan or a split loan before committing.

The RBA cash rate is 4.60% from 30 September 2026, following its fourth increase of the year. The next scheduled decision is 3 November.

August's annual inflation was 4.0%, with underlying inflation at 3.6%, in the ABS release on 30 September. That doesn't tell us which fixed offer will be cheapest. I'd compare the repayment certainty you want with the cost of leaving the loan early if your plans change.

A fixed offer reflects the lender’s funding costs, expectations and pricing decisions. It can change before an RBA announcement or while the cash rate stays the same. Compare current quotes for the same loan amount, purpose, repayment type and fixed term.

Our interest-rate outlook covers the banks’ forecasts. For a fixed loan, the more immediate questions are what rate you can secure, when it becomes binding and how much flexibility you need.

Ask for a written rate quote and the full fee schedule. Compare the cost over the period you expect to keep the loan, including what happens after the fixed term. If there is a cashback or discount, check that you qualify and that ongoing costs do not outweigh it.

Check when the rate becomes binding

The rate available at application can change before settlement. Ask whether a rate lock is available, what it costs, how long it lasts and what happens if settlement is delayed or rates fall. Fixing just before an RBA meeting does not reliably secure a better offer.

A mortgage broker can compare suitable lenders and explain the differences in fees and features. The lowest advertised rate may not be the cheapest loan for the way you plan to use it.

A comparison rate combines the interest rate and most fees using a standard loan amount and term. It helps with comparison, but your actual cost depends on your own loan and how you use it.

The interest rate is only part of the choice. Think about extra repayments, access to savings and what happens if you need to leave the loan early.

With a fixed loan, you keep the agreed rate even if variable rates fall. With a variable loan, your lender can change the rate and required repayment. A split loan limits those changes to the variable portion.

The repayment comparison below uses one $800,000 example so you can compare all 3 options on the same basis.

Rate lock

A rate lock can secure a fixed rate for a limited period, usually for a fee. Confirm its expiry and conditions, including what happens if the lender lowers rates before settlement.

Extra repayments and redraw

Ask how much extra you can pay and when the allowance resets. If redraw is available, check the amount you can access and whether taking money back changes your remaining repayment allowance.

Offset accounts

Some fixed loans have no offset, some offer a partial offset and some have a full offset on eligible terms. Check the exact product, account fees and how much of the savings balance reduces the interest charged.

Interest in advance

Some fixed investment loans let eligible borrowers pay interest in advance. Confirm the lender’s timing and pricing requirements, then speak to your accountant about the tax treatment for your circumstances.

Construction loans

Ask whether you can fix during construction or only after the final progress payment. Repayments during the build may still change as more money is drawn, even if the interest rate is fixed.

Split loans

You can fix part of the balance and keep the rest variable. Check the features and fees on each portion, including which account can receive extra repayments or use an offset.

If a repayment increase would stretch your budget, certainty may be worth paying for. If you expect to sell, refinance or pay down the loan quickly, the restrictions may matter more.

With the cash rate at 4.60% after 4 rises this year, I'd test your budget against another rise as well as a later cut. A fixed offer can already reflect market expectations, so waiting for a particular RBA decision doesn't guarantee a cheaper fixed loan.

Compare the repayments on the same loan

The example below uses an $800,000 principal-and-interest loan over 30 years. It assumes 6.60% fixed and 6.80% variable. These are assumed rates, not lender offers or forecasts.

The split example has $400,000 in each portion. Repayments are calculated monthly and rounded to the nearest dollar, with no fees, offset or extra repayments. If the variable rate changes later, the new repayment also depends on the balance and term left at that time.

Compare the total cost and flexibility as well as the monthly amount. A lower starting repayment alone does not tell you which option will cost less over the fixed period.

A 1-year term gives a shorter period at a known rate and lets you review sooner. It does not make selling or refinancing within that year free of break costs. Compare the actual quotes; shorter terms are not always cheaper.

When a 2-year term may fit

A 2-year term may fit if you want repayment certainty beyond the next year but expect to review your plans before a 3-year term would end. Compare the written 1, 2, 3 and 5-year quotes on the same loan balance and repayment term. Check what selling, refinancing or paying a lump sum within those two years could cost.

When a 3-year term may fit

A 3-year fix may suit plans that are unlikely to change over that period. Check the extra repayment allowance and what leaving early could cost. You do not have to refinance with another lender when the term ends.

When a 5-year term may fit

A 5-year fix keeps the agreed interest rate for longer. That may suit you if the repayment is comfortable and you expect to keep the loan unchanged. The rate can be higher or lower than shorter-term offers.

Think carefully about changes you might make over those years, such as selling, renovating or using an inheritance to repay debt. Get the lender’s terms on early repayment rather than assuming the cost will be small.

At expiry, the loan normally moves to the variable rate specified by your contract unless you arrange another option. That rate may be higher or lower than your fixed rate, and an agreed discount may apply.

Start comparing options about 3 months beforehand. Ask your lender for the likely rate and repayment, then compare refixing, staying variable or refinancing. If you want to avoid breaking the fixed term, confirm the date a switch or refinance can settle.

Allow for fees and the remaining loan term. Restarting a 30-year mortgage can lower the monthly repayment while increasing the total interest you pay.

Whether fixing saves you money depends on your starting rate, fees and how variable rates move over the whole fixed term. I would compare the total cost alongside the value of knowing your repayments.

Before signing, check the situations most likely to change your plans:

• Selling or refinancing before the term ends can trigger a break cost.
• Extra repayments may exceed an allowance even if you keep making the normal monthly payment.
• A fixed loan may have limited offset or redraw access.
• The rate and repayment after expiry can differ from the initial offer.
• Fees can outweigh a small difference in the advertised rate.

Get the answers in writing, especially if you expect a large payment or a move during the fixed period.

Your broker can use your balance, term and likely extra repayments to compare the options. Bring your plans for the property as well as the rate quote.

You can often pay extra on a fixed loan within a lender’s allowance. The allowance may reset each month, each fixed-rate year or only when the whole fixed term ends. Exceeding it can trigger a break cost.

These limits cover extra repayments; closing or changing the loan early can still have a cost. Confirm the terms that apply to your own contract.

Before transferring a lump sum, ask how much of your allowance remains and when it resets. Some older loans have different conditions.

If the payment would exceed the allowance, compare the cost of paying now with waiting until the fixed period ends. A variable portion may offer more room for extra repayments, subject to its terms. Ask about eligible offset or redraw access if keeping savings available matters to you.

Ask your lender for a written break-cost quote before you commit to selling, refinancing or making a large repayment. Specify the amount and intended payment date, then check when the quote expires and whether discharge or administration fees apply.

The calculation can depend on the balance being repaid, time left, changes in relevant wholesale funding rates and the contract’s repayment assumptions. It may discount future amounts to today’s value.

Your fixed mortgage rate minus a currently advertised mortgage rate is not enough to calculate the charge. Compare the lender’s quote with the cost of waiting until expiry where that fits your plans. Our break-cost guide explains what to ask.

A split loan divides your balance into fixed and variable portions, each with its own rate and repayment requirements. For example, the $800,000 comparison above fixes $400,000 and leaves $400,000 variable. Other proportions are possible.

The fixed portion gives certainty for its agreed term. The variable portion can change in price, but may offer more flexibility for extra repayments and eligible offset or redraw access. Check the fees and rules for both portions.

Choose the split around the debt you want at a known rate and the cash you expect to have available. If you plan to make substantial extra repayments, leave enough flexibility for them. A 50/50 split is an example, not a default recommendation.

Compare repayments if the variable rate rises as well as falls. A break cost can still apply if you repay or change the fixed portion early.

A fixed loan can suit you when its repayment fits your budget and you expect to keep it through the fixed period. Before choosing, check the rate, fees, extra repayment allowance, access to savings and what happens at expiry.

If you want certainty on some of the debt, compare a split loan too. Choose around your plans rather than a single prediction about interest rates.

Bring your current statement or proposed loan amount, remaining term, rate quotes and plans for extra repayments. Our team can compare suitable fixed, variable and split options and explain the costs of switching.

Call 1300 088 065 or contact our team to work through the numbers. You can also book a free assessment.

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