Fixing home loans is a good way to take control of your budget. When you fix your home loan with us, you’re able to lock in a rate for a nominated period of 2 to 5 years. Your repayments are also set during that fixed rate term and won’t change, providing you with greater certainty.

But it’s not for everyone. Fixing your home loan means you miss out on the benefits of a variable loan, like an easing on your family budget when interest rate fall and greater flexibility with your money.

Not sure if a fixed rate or a variable rate is more suitable for you? Here are some things to consider.

  Fixed rate home loan Variable rate home loan
When might I consider it?
  • If I want to lock in a rate for a set period of time
  • If I prefer certainty around my repayments
  • To help me with budgeting
  • If I’m less concerned with changes to interest rates
  • If I want to make additional repayments into my loan
  • If I need to access redraw
Can I make additional repayments into my loan? Only $10k per annum (penalty costs may apply when exceeding this threshold). Yes.
Can I access redraw? Not during the fixed rate term. Yes.

Still not sure about what you’d prefer? Then maybe you should learn about splitting your home loan.

Breaking a fixed home loan: the deal with fixed rate break costs

Sometimes life happens and circumstances change. As a result you may find that you need to ‘break’ your current fixed rate term. In other words, you’ll no longer be making your fixed payments for the remainder of your fixed period.

This can happen when you:

  • discharge your loan when paying it out, selling your property or refinancing or make payments in excess of $10,000 per annum during the fixed rate term (with the first one year period starting on the first day of the fixed rate period)
  • make a change to your loan such as switching to a variable rate, changing your repayment type (Principal and interest or Interest only) or changing your loan purpose (Owner Occupied or Investor).

While breaking a fixed home loan isn’t a problem, you should expect to pay break fees.

Why are break costs charged?

We get it, fees are never great. But they’re there for a reason. Let’s explain.

When you lock in your rate for a specified term, we enter into a contract with you to fix the rate for that specified term. At the same time, we also enter into a contract with a third party to lock in our funding costs at a fixed rate over the same period.

When you break your fixed rate term and wholesale rates have fallen from when you initially fixed your loan, we will have incurred a loss. This is because funding costs are now lower compared to the rate at which we initially locked them in with the third party. Break costs are charged to cover this financial loss we incur.

What’s the cost of breaking a fixed rate mortgage?

The amount of this fee varies and depends on a number of factors, like your fixed interest rate, how much longer you have left on your fixed rate period and the current balance of your loan.
 
For further detail on how break cost calculations work, check out our ‘Break Cost Fact Sheet’.

What happens after your fixed rate home loan expires?

At the end of your fixed rate term, your home loan doesn’t magically disappear (as nice as that would be). Your loan simply changes to a variable rate home loan with principal and interest repayments. As a result, your repayment amount may change from what you are paying during your fixed rate term.  But you do have other options.

Depending on what’s important to you, you can:

  • Refix your home loan for another fixed rate term
  • Get a split home loan with fixed rate and variable rate portions
  • Just stay on a variable rate.

But if you forget or don’t know what to do, don’t worry. We’ll get in touch with you prior to your fixed rate term expiring (around 30 to 60 days before it ends) with further detail around options you can consider and the steps you’d need to take for them.


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