When you fix, the lender agrees to charge the same interest rate for an agreed term, most commonly between one and five years. Your scheduled repayment is set for that period, so a rise in variable rates does not change what you pay. The flip side is that if rates fall, your rate stays where it is.
Fixed rates are not set by the Reserve Bank. Lenders price them on their own funding costs and on where the market expects rates to go over the fixed term. That is why fixed rates can move before or after a cash rate decision, and why a lender's two-year and five-year rates can sit well apart. The RBA lifted the cash rate to 4.60% in September 2026, but a new fixed rate reflects expectations for the whole term, not just today's cash rate.
Certainty is the main one. If your budget is tight, you have just bought, or your household income is about to drop for a while (parental leave, for example), knowing your repayment for the next two or three years makes planning much easier. You are also protected if variable rates rise during the fixed term.
Fixing can suit investors who want predictable holding costs too. You do not have to choose all or nothing. A split loan lets you fix part of the balance for certainty and keep the rest variable for flexibility, and the split can be weighted to suit how much of each you need.
Fixed loans usually come with fewer features. Many lenders cap extra repayments during the fixed term, and an offset account is often limited or not available. If you sell, refinance or repay more than the allowed amount, the lender can charge break costs. Most early termination fees were banned for home loans taken out from 1 July 2011, but break costs on fixed rate loans are still allowed.
Break costs depend on how market rates have moved since you fixed, how much of the loan is affected and how long is left on the term. When market rates have fallen below your fixed rate, break costs can be large. When rates have risen, they may be small or nothing at all. Ask your lender for a written estimate before you break a fixed loan.
At the end of the term the loan usually moves onto the lender's variable rate, known as the revert rate, unless you choose to fix again. The revert rate can be higher than the rates offered to new customers, so the end of a fixed term is a natural time to review the loan. Your lender will normally write to you before expiry, but it is worth putting the date in your own calendar.
You do not need to wait until expiry to plan. If you think you will want to refinance, start the conversation a couple of months ahead so the new loan is approved and ready to settle on the day the fixed term ends, which avoids break costs altogether.
The fixed rate you see when you apply is not always the rate you get. If the lender changes its fixed rates between application and settlement, the loan generally settles at the rate on offer on settlement day. Some lenders offer a rate lock for a fee, which holds the rate for a set period. Whether it is worth paying for depends on how long settlement is and how rates are moving.
Lenders still assess you as if rates were higher. APRA expects banks to test whether you can afford repayments at a rate at least 3 percentage points above the loan rate, so choosing a fixed rate does not by itself increase how much you can borrow.
Jason and Steve are Adelaide mortgage brokers who give honest advice at no cost to you. No obligation.
The information on this page is general in nature and does not constitute financial advice. Given Finance Pty Ltd (t/a Lendology) ACN 624 144 501 is authorised under LMG Broker Services Pty Ltd Australian Credit Licence 517192.