What happens when your mortgage fixed rate expires?

Fixed interest rate home loans have a built-in end point, typically between 1 and 5 years. So what do you do when your fixed-rate mortgage ends? After that, your loan reverts to a variable interest rate, and you have 3 options:

1. Do nothing – and your loan reverts to a variable rate. This happens automatically and you don't need to do anything.
2. You find a better deal and refinance. If you're not happy with the new rate then you can compare rates and refinance your mortgage.
3. You fix your rate again but stay with your lender. It's possible to lock in a new fixed rate term with your lender. But it won't be the same interest rate as before.

Fixed rate ending soon?

Interest rates are much higher now than they were just a couple of years ago. If your fixed rate is about to end you could be in for a shock. Check current rates and use a mortgage calculator to see how much a higher rate will impact your repayments.

1. Your loan reverts to a variable rate

If your fixed rate ends and you do nothing, your lender simply moves you to their variable rate loan. If you're wondering, can I extend my fixed rate mortgage, the answer is unfortunately no – you can only apply for new fixed rate loan, based on whatever the rates that day.

Let's say you locked in a 2-year fixed interest rate exactly 2 years ago and it looked something like this:

• Interest rate: 2.20%
• Loan amount: $400,000
• Loan term: 30 years
• Loan type: Owner-occupier, principal-and-interest repayments
• Your monthly repayment = $1,519

Now the 2 years have passed and your loan reverts to your lender's current variable interest rate.

Your new variable rate loan:

• Interest rate: 6%
• Loan amount: $400,000
• Loan term: 30 years
• Loan type: Owner-occupier, principal-and-interest repayments
• Your monthly repayment = $2,399

Your new loan has a much higher interest rate (because interest rates have risen a lot since you fixed). Now you're paying almost $800 a month more than before.

You don't have to do anything now except make sure you can afford the repayments. But it's a really good idea to compare interest rates from other lenders to make sure you're getting a good deal.

Our expert says

"Three months before my fixed rate home loan ends, I will start to compare my options to see what rates are available compared to the rate I'll pay once my fixed rate ends. I often look for cashback deals because a few thousand dollars worth of free money is always welcome! Refinancing might seem like a hassle, but it's a small amount of time and paperwork for the potential to save a really significant amount of money – so in my book, it's always worthwhile comparing."

Sarah Megginson

Head of editorial

2. You find a better deal and refinance

The end of a fixed rate period is a good time to think about switching, especially if your lender isn't giving you a good deal on your new variable rate.

Here's what you need to do:

1. Check your new rate and compare it to other rates on the market. Compare rates from various lenders and see if your new rate stands up.
2. Before you switch, contact your lender. You might be surprised to learn that your lender actually is offering a really good rate for new borrowers while leaving you on a higher rate. Call your lender up and ask it to give you its lowest rate.
3. If you think you can get a better deal elsewhere, refinance. If your current lender can't match the deal you can get elsewhere, refinance your home loan (which simply means applying for a new loan). Once approved, you discharge the old one and begin the new one.

3. You fix your rate again but stay with your lender

This is an option for borrowers who value the certainty of fixed repayments over anything else.

Just keep in mind that if you fix your rate in today's market, the rate will be much higher than the fixed rate you could have got between 2019 and 2021.

If you really want a fixed rate home loan, you could still find a better option by comparing fixed rate home loans rather than just accepting the rate your bank has offered you.

Should I fix my rate now or is variable a better option?

• Variable rates are usually lower than fixed rates, though this isn't always the case.
• Variable rate loans are easier to refinance or pay off early (there are no break fees).
• Fixed rates offer more certainty and make it easier to budget, because you know exactly what you're paying
• Fixed rate loans are usually more expensive to exit or refinance early, because you have to pay break fees.
• Whether you choose fixed or variable, it's unlikely you'll "beat the bank", so make the best choice for you.

Read more about the differences between fixed and variable interest rate loans.

Finder survey: How many Australians know what their current home loan interest rate is without checking?

More questions about fixed rate loans

• Can I break my fixed rate loan early?

  You can break a fixed rate home loan early. This can happen because you want to repay the loan early or because you're refinancing to a new loan. You can do it, but there's a fixed rate break fee involved.
  The break fee can cost hundreds or even thousands of dollars, depending on how long is left on your fixed rate period and other factors.

• When is a good time to lock in a fixed rate?

  It's hard to time the market when fixing your rate. Some borrowers locked in very low rates in the last few years but right now, you will almost certainly have a higher rate if you fix.
  But fixed rates are not just about locking in a good deal. It's about certainty, knowing what your repayments will be and knowing they won't change for a while. For some borrowers that's worth being on a higher interest rate.

• Can you extend a mortgage term during a fixed rate term?

  No. Fixing again requires ending your current loan and fixing again at current market rates. And these change all the time as lenders adjust pricing based on the cost of accessing money to fund home loans.
  It's highly unlikely you could get the same rate you fixed at, or similar, in today's market.

Written by

Richard Whitten

Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

Richard's expertise

Richard has written 562 Finder guides across topics including:

• Home loans
• Property
• Personal finance
• Money-saving tips