Mortgage broking

The Reserve Bank of Australia has said it expects about half of all outstanding fixed home loans to switch to variable rates in 2023. This equates to around 800,000 home loans, totalling about $350 billion.

Many Australians were lucky to lock in record-low fixed interest rates on their mortgages in the last few years; but for some, this may be coming to an end in 2023. This will leave affected households paying two to three times their current fixed rate, due to rapidly rising interest rates.

If your fixed-rate home loan is approaching its end, you’ll need to make some decisions. Should you re-fix your loan at a new rate, change to a variable rate, or even consider refinancing to a new mortgage provider?

In this article, we’ll talk through your options when it comes to preparing for the end of your fixed interest rate.


What is a fixed-rate mortgage?

A fixed-interest rate home loan is one where the rate of interest you pay on your mortgage is locked in for a certain period. In Australia, a fixed rate typically lasts between one and five years. During the time your rate is fixed, your interest rate and your compulsory repayments won’t change.

If you fix your interest rate when interest rates are low, you could be saving yourself from paying more when interest rates rise. But for this reason, fixed interest rates tend to be a bit higher than variable rates. While it makes it easier to budget for the future as you know exactly what your repayments will be, you could also be missing out on big savings when the interest rate falls.

Also, many fixed-rate mortgages do not have offset accounts, which means that extra savings cannot be used to reduce interest paid on the loan. With a fixed rate, you are sometimes impeded in terms of how quickly you can pay off the loan. A break fee may be incurred if you want to pay it off early.


What is a variable rate mortgage?

A variable-rate home loan features an interest rate that may change over time, according to the rise and fall of interest rates. If you choose a variable rate home loan, you may be able to take advantage of any interest rate decreases over your loan’s term, meaning you pay less interest on the home loan balance and your repayments go down.

On the other hand, when the interest rate increases, so too will the amount of interest you’re paying, meaning your repayments will go up.


How can I prepare for the switch?

If you don’t do anything before your fixed term rate lapses, your mortgage provider generally switches your loan to its standard variable rate, which can be much higher than some of the discounted options available to new customers.

If you are worried about what will happen when your fixed-rate mortgage ends, you should speak to a trusted financial expert at your earliest convenience. This helps you avoid any scenario where you are stuck with the imposed rate your current lender offers when the fixed rate period ends.

It’s important to research your options because, with each rate increase, your borrowing capacity can be reduced because lender calculations on household expenditure and expenses change. And as house prices fall, you could end up owing more on your house than what it is currently worth. Here are the steps we recommend you take prior to the end of your fixed interest rate.

  1. Negotiate with your current lender
    Speak to your current lender in advance to find out what your rate will change to. This gives you an opportunity to compare with other rates available in the market and think about whether switching providers is right for you. You could also negotiate a better rate to save you the effort of moving to a new provider.
  2. Research what other lenders can offer
    See how your loan stacks up against other home loans out there to determine if you’re getting a competitive interest rate. If you do find a better offer, switching providers can be the right move. But make sure you’re aware of the costs involved in switching, as borrowing costs and fees can sometimes be greater than the amount you would save.
  3. Consider re-fixing your home loan
    Even though now may not be the best time to go with this option, if you have enjoyed the certainty that comes with a fixed-rate loan, you can refix your mortgage with an up-to-date interest rate. However, you will be locked into the new fixed interest rate for a period of your loan term, unless you choose to end the contract earlier which may result in break fees. Be sure to also carefully check out the features of a fixed loan too, such as fee-free extra repayments, redraw, and linked offset accounts. Many fixed-rate loans do not provide these features.
  4. Consider splitting your loan
    If you can’t decide on a variable or fixed rate, or if you want a combination of flexibility and predictability, you can potentially have part of your mortgage fixed and part variable. For example, you could have 60% of your loan on a fixed rate and 40% on a variable rate. This approach can offer you the best of both worlds. The variable rate component lets you take advantage of any interest rate falls, while the fixed portion shelters part of your loan from rising interest rates.
  5. Talk to a trusted lending professional
    If you can’t decide which option is best for you, a mortgage expert may be able to offer you advice. They can look at your finances and recommend options that suit your specific needs. They’ll also be able to guide you through the process of switching to another provider if that’s what you decide.


If you are worried about what will happen when your fixed-rate mortgage ends, you should speak to a trusted financial expert at your earliest convenience. Before you make any decisions, crunch the numbers with an online mortgage switching calculator.

The expertise and experience of our Geelong Mortgage Broking team at The Hrkac Group can help you with your home loan, whether it’s securing a new interest rate for you, refinancing your current loan, or discussing the finance of an investment property. To make an appointment to meet with one of our friendly Geelong Mortgage Brokers, contact us via email or phone (03) 5224 2366.


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