If you have a fixed home loan ending in the next six months, this is the most valuable thing you will do with an hour of your time all year.
When a fixed term expires, your loan does not sit still. It rolls automatically onto your lender's variable revert rate. That rate is set by the lender, it applies without you agreeing to anything, and it is almost never the sharpest rate that lender is offering. New customers get the good pricing. You get the revert rate.
Most lenders send a letter about 30 days before the switch. By then you have very little room to move.
Why the revert rate is the problem
A revert rate is not a penalty and it is not hidden. It is written into your loan contract. It is just set at a level that assumes you will not do anything about it, and most people do not.
The gap between a revert rate and a competitive market rate is commonly somewhere between half a percent and a full percent. On a $600,000 loan with 25 years remaining, a 0.75% difference is roughly $4,500 a year. Nothing about your situation changed. Your income is the same, your property is the same, your repayment history is the same. The only thing that changed is that a date passed.
Start three to six months out, not thirty days
This is the part people get wrong.
A refinance to a new lender takes four to eight weeks from application to settlement. Some non-bank lenders move faster, but four to eight weeks is the realistic planning range once you account for document collection, valuation and the discharge process with your existing lender.
If you start when the letter arrives, you will spend at least a month or two on the revert rate while the paperwork moves. On a $600,000 loan, two months at an extra 0.75% is about $750 you did not need to spend.
Starting early costs you nothing. Pre-approval with a new lender typically lasts three to six months, so you can have everything lined up and simply settle in the week your fixed term ends.
Your four options
1. Ask your current lender for a better rate
Do this first. It costs one phone call and it sometimes works.
Ring the retention team, not the general line, and say you are reviewing your loan because your fixed rate is ending and you have been quoted a better rate elsewhere. Have an actual number to quote. Vague pressure gets a vague answer.
Retention discounts are real, and lenders would rather discount than lose the loan. If they move enough, you are done with no paperwork and no switching costs.
2. Re-fix with your current lender
Simple, no discharge fees, no valuation. You keep the certainty of a known repayment.
The trade-off is that fixed loans usually limit how much extra you can repay each year, and most do not offer a full offset account. If you expect a bonus, an inheritance or a period of higher income, a fixed loan can stop you putting it to work.
3. Roll onto variable and stay
Sometimes the right answer, particularly if you want to pay the loan down aggressively or you might sell within a year or two.
Do not just let it happen by default though. Ask what variable rate you will actually be on, and ask whether that is their best variable rate. Frequently it is not, and asking is enough to fix it.
4. Refinance to a new lender
The option that usually produces the biggest saving, and the one that takes the most work.
Worth it if the rate gap is meaningful and your equity position is reasonable. Less worth it if you are close to 80% LVR, because the LMI question can eat the benefit, or if you are planning to sell soon.
Splitting is underrated
You do not have to pick one.
Splitting the loan means fixing part of it and leaving the rest variable. You get some certainty on the repayment, and the variable portion still lets you make extra repayments and use an offset account.
A common structure is fixing the portion you know you will not pay down early, and leaving variable the amount you might attack with savings or bonuses. It suits people who want to sleep at night without locking themselves out of paying the loan off faster.
Check your break cost before doing anything early
If you are thinking of moving before your fixed term ends, get the break cost figure in writing from your lender first.
Break costs depend on how wholesale rates have moved since you fixed and how much of your term remains. They can be trivial. They can also be thousands. There is no way to estimate this accurately from the outside, so ask rather than guess.
If your term ends within a few months, waiting is almost always cheaper than breaking.
What lenders will look at
Whichever direction you go, an application means your position gets reassessed. Things that have changed since you first borrowed will matter:
- Your LVR. If the property has grown, you may now be under 80% and able to access sharper pricing. If it has fallen, your options narrow.
- Your income and employment. A job change or a move to self-employment changes which lenders will consider you.
- Your debts. Credit cards are assessed on the full limit, not the balance. An unused $20,000 card is still reducing your borrowing power.
- Your credit file. Recent enquiries count. If you have applied to several lenders lately, that is working against you.
The one mistake to avoid
Do not apply to four lenders to see who gives you the best rate.
Every application leaves a hard enquiry on your Equifax file. A cluster of recent enquiries reads as risk to every lender who looks afterwards, and it can move you from approvable to marginal at a lender who would otherwise have said yes.
Work out which lenders will approve you first, then apply once. Your Kreddi Score shows your position across credit health, debt efficiency, asset strength, cash flow and borrowing power, and which lenders you qualify for today, with no impact on your credit file.
What to do this week
- Find your fixed rate expiry date. It is on your loan statement.
- Ask your lender what revert rate you will roll onto.
- Work out the monthly difference with the refinance calculator.
- If the gap is worth chasing, get your Kreddi Score before anyone pulls your credit file.
- Ring your current lender's retention team with a real competing number.
If it turns out staying put is your best option, that is a good outcome and it took you an hour to confirm. If it is not, you have four to six months to do something about it properly.
Frequently Asked Questions
What happens when my fixed rate expires in Australia? Unless you act, your loan automatically rolls onto the lender's variable revert rate. That rate is set by the lender and is rarely their most competitive offer. Most lenders write to you about 30 days beforehand, which is later than you want to be starting.
When should I start looking before my fixed rate ends? Three to six months out. A refinance takes four to eight weeks from application to settlement, and you want the new loan ready to go the week your fixed term ends rather than paying a revert rate for two months while paperwork moves.
Can I refinance before my fixed rate ends? You can, but breaking a fixed loan early triggers a break cost that can run to thousands depending on how rates have moved and how much term remains. Ask your lender for the figure in writing. If the term ends within a few months it is usually worth waiting.
Should I fix again or go variable? It depends on whether you value certainty or flexibility, not on predicting rates. Fixed loans usually limit extra repayments and rarely include a full offset account. Variable loans cost more if rates rise but let you pay the loan down faster. Splitting the loan is a middle option.
Will my repayments go up when my fixed rate ends? Usually yes, if you fixed when rates were lower than the current revert rate. The size of the jump depends on the gap between your fixed rate and the lender's revert rate. Your lender can tell you the exact revert rate that will apply.
Find Out What You Can Actually Refinance To
Before your fixed term rolls off, find out which lenders would take you and at what rate. Your Kreddi Score checks your position against real lender policy in about 15 minutes, with no credit enquiry and no obligation.
If you just want a rough number first, the refinance calculator will show you the monthly difference in under a minute. Either way, start before the revert rate does.
This is general information, not personal advice. Whether refinancing suits you depends on your circumstances, and you should consider your own position or speak with a licensed broker. NIK Finance Pty Ltd is a Credit Representative (567387) of Finsure Finance & Insurance Pty Ltd, Australian Credit Licence 384704.