To Fix or Not to Fix Your Home Loan: What to Do When Fixed-Rate Term Ends

By Deltos Finance on December 28, 2023
A man in front of a laptop, seemingly thinking about an important decision

When your fixed-interest home loan term comes to an end, you’re faced with a decision on what to do next: to fix or not to fix your home loan. This is a crucial time to review your options and potentially secure a more competitive deal on your home loan. It can be a significant event in your financial journey, and being prepared is key. Let us offer some insights to help you prepare and decide better. 

What Happens at the End of Fixed-Rate Terms?

In Australia, a fixed-rate mortgage typically lasts between one & five years. Your home loan typically reverts to the lender’s standard variable rate at the end of your fixed term. This rate may be higher than other rates on the market, potentially leading to what is known as a “loyalty tax” if you stay with your current lender. It’s important to understand that you don’t have to do anything, as your loan will automatically roll over to this variable rate. However, if you’re looking for a better deal, it’s advisable to start comparing options about three months before your fixed rate expires.

Preparing for the End of Your Fixed Term

At Deltos Finance, we want to empower you and help you make the best decision for your mortgage needs. Here are some of our tips to help you address the question: “Should I fix my home loan interest rate?”

  • Review Your Options Early: Start looking at different home loan options well before your fixed term ends. This could include considering whether a variable, fixed or split-rate home loan suits your situation and needs better. If you want the stability of a fixed rate and the flexibility of a variable rate, consider a split-rate home loan for a new deal once your fixed rate expires. 
  • Compare New Deals Comprehensively: Don’t just focus on the interest rate; consider the entire loan product, including potential fees.
  • Negotiate with Your Lender: Check what rates are offered to new customers and ask your current lender if they can match or beat these rates when reviewing your new home loan interest rate. 
  • Seek Expert Advice: Consulting with a home loan specialist, financial advisor or mortgage broker specialising in refinancing can provide clarity and direction on the best course of action for your specific situation.
fixing home loan interest rate

Refinancing and Extending Fixed Terms

When your fixed-rate term nears its end, you might wonder if extending the same fixed rate is possible. Generally, extending your existing fixed term is not an option, particularly in a rising interest rate environment. Remember that interest rates are often subject to change depending on economic factors, and most lenders adjust their rates accordingly. Since lenders usually don’t offer the ability to extend the fixed term under the original conditions, your next option is to consider refinancing your loan.

Refinancing involves taking out a new loan to replace your existing mortgage. You could acquire that new loan from a different lender. You could even refinance to another fixed-rate loan, but keep in mind that the new mortgage will be subject to the prevailing market rates, which could be higher or lower than your original rate. Be sure to calculate whether this move is financially beneficial by comparing the new fixed rates against current variable rates and considering your long-term financial goals.

Refinancing to a variable rate loan is another option that offers more flexibility and features, such as home loan redraw facilities or offset accounts. While variable rates can sometimes be lower than fixed rates, they are also subject to change with market conditions, making them a potentially more volatile option. 

Another strategy to consider during refinancing is loan splitting. This approach involves dividing your loan into fixed and variable portions, thereby balancing the stability of fixed rates with the flexibility of variable rates. It’s a hybrid solution that can cater to the needs of borrowers looking for both consistency in their repayments and the ability to benefit from favourable market conditions.

Regardless of the loan structure of your new mortgage, refinancing offers a chance to review your entire mortgage strategy — not just the interest rate. Take this as an opportunity to ensure it continues to meet your needs.

The True Cost of Rolling Off a Fixed Rate 

If the fixed period ends and you haven’t refinanced the loan or made other arrangements, your loan will revert to your lender’s standard variable interest rate. That is also called “rolling off a fixed rate.” And this gives many homeowners a bit of a shock since rolling off a fixed rate might come with an increase in repayments. This can be a source of financial strain for those who may not be prepared for the higher costs.

So, make a move before the term of your fixed-rate mortgage ends. If you’re living in Hobart, consult with the best mortgage brokers in Hobart to explore suitable home loan options you can acquire to refinance or fix your mortgage when its fixed term ends. For instance, Deltos Finance is here to help. We do more than input numbers in a home loan calculator; we will work closely with you to tailor our refinancing solutions to your specific fixed-rate loan timeline and unique financial situation.

Let Us Guide You Through Your Next Steps

Are you approaching the end of your fixed-rate term and unsure about your next steps? Contact Deltos Finance today. Our expert team of home loan brokers in Hobart is ready to guide you through your options, helping you make an informed decision that suits your financial needs. Don’t navigate this crucial decision — to fix or not to fix your home loan — alone; let Deltos Finance be your partner in securing your financial future.

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