What Should I Do When My Home Loan Fixed Rate Period Ends?
When your fixed rate home loan term expires, review your personal and financial circumstances before re-fixing or switching to variable.
March 2022 – 8 minute read
What you'll learn
- What happens when my fixed rate period ends?
- What’s the difference between fixed and variable?
- When should I fix my home loan interest rate?
- What happens if interest rates drop during my fixed rate period?
- How do I re-fix my home loan?
What happens when my fixed rate period ends?
When your fixed rate interest term expires, you'll have two options: re-fix or switch to a variable interest rate. Before deciding, look at your circumstances, future financial goals, and current market trends as they could have changed. Most lenders offer fixed rate terms from 1 to 5 years and, depending on the period you select, will guarantee the interest rate you'll pay for that term. You’d have chosen a fixed rate term when you initially locked in your interest rate, so your lender will only get back in touch with a new offer close to expiry. In that offer, you'll have the option to re-fix your mortgage for up to 5 years, or your home loan will automatically switch to a variable rate.
To make the offer less complicated, your lender will typically provide you with the opportunity to re-fix or detail the variable interest rate if you want to switch.
In most cases, switching to a variable interest rate will happen automatically after your fixed rate expires, so it will likely not require you to respond. However, before you make any decisions, it's always wise to review your home loan to ensure your loan meets your needs now and into the future.
Why should I review my home loan?
Whenever there’s a change in circumstances, whether personal or to do with your home loan set up, it's time to review your loan, especially when your mortgage is coming off a fixed rate period. You should be looking to review your home loan at least 3 months before expiry, as this will give you the time to implement changes if required.
What do I need to do to review my home loan?
To review a home loan, you might like to take into consideration:
- How long have you had, and how long do you intend to keep the loan?
- What's the interest rate or what rate is being offered, and is it competitive?
- Is it a variable or fixed rate loan, and are you paying Principal and Interest or Interest Only repayments?
- What features are available on your loan, and are you using them effectively?
Ask for a Home Loan Health Check
Once you have an idea of your situation, you can plan for your current circumstances and future needs. Westpac customers can get help by calling 8am-8pm, 7 days a week (Sydney time): 132 558 or can request a callback.
Can I extend my fixed rate period?
No. Once your fixed rate term has expired, your lender will provide you with a new fixed rate offer. Lenders don’t extend fixed rate terms as the wholesale money market, where your lender borrows the money for your fixed rate period changes daily. When your fixed period has expired, the wholesale interest rate could be significantly different.
2. What’s the difference between fixed and variable?
The main difference between a fixed and variable home loan is that the interest rate is guaranteed with a fixed rate loan. In contrast, the interest rate could go up or down depending on the economy with a variable loan.
A fixed rate loan generally provides the borrower with more certainty, while a variable loan provides more flexibility.
- Lock in a rate for a set period to protect against rate rises
- Easier to budget as repayments are the same over the fixed period
- Make and redraw^ extra repayments to a set limit during the fixed term. At Westpac, that limit is $30,000
- Avoid break costs** when buying and selling using your loan’s portability feature.
To take advantage of the benefits of both home loan types, you could opt to split your home loan by fixing a portion of your loan and leaving the remainder at a variable rate.
How do I know which is better – fixed or variable?
One is not necessarily better than the other. It all depends on your current and future needs. The best idea is to weigh up all the pros and cons. By comparing home loans, you can work out if you want more flexibility with your loan or if you want more certainty. Our handy home loan calculators can also help look at your borrowing capabilities, especially if you're looking to increase your mortgage, discover what equity you might have in your home, and calculate your potential repayments.
Talk to your lender about your home loan options
Speak to your lender to find out the latest home loans and the features and services you can expect to be made available. New offers, options, or a home loan package# could help you save on interest and pay off your home loan sooner.
Let's talk home loans
Call 8am-8pm, 7 days a week (Sydney time): 132 558 or you can request a callback.
3. When should I fix my home loan interest rate?
You can fix your home loan interest rate at any time if your mortgage is not currently fixed. Whether you should lock in a rate will depend on your circumstances. If your home loan is now on a fixed period and you’d like to re-fix it as soon as the term expires, either wait for your lender's offer or reach out to them.
At Westpac, we send re-fix offers to all our fixed rate borrowers at 6 months before expiry and a follow up at 3 months before. Our customers can opt to accept the new fixed rate offer, which will automatically come into effect when the previous term expires. If customers don’t want to re-fix, their loan will switch over to a variable rate loan upon term expiry.
Are you a Westpac customer with a fixed rate period due to expire soon? Check your home loan account for a new offer. Or, if your fixed rate period has already expired, you can re-fix your home loan in three easy steps.
When’s it a good idea to lock in your interest rate?
No one can predict the future, so you can’t know what will happen to interest rates in one, two or five years. However, it could be a good idea if your circumstances mean you’d prefer to know your repayments for up to 5 years, and you want to lock in a rate before interest rates rise.
Lock in your interest rate if you think rates will rise soon and if you’d like the certainty of knowing what your repayments will be.
Should I always accept my lender’s interest rate offer if I want to re-fix?
When a lender makes you a new fixed rate offer, they typically apply the standard rate and any package discounts. Other factors such as your loyalty as a customer, other offers that you might be able to secure from competitive lenders, and the amount of equity you have in your home may not have been factored in.
The answer is, therefore, not a straightforward one. If you haven’t before, you should ask for a review of your home loan as many factors relating to your loan, your circumstances and the market could have changed.
Ask for a Home Loan Health Check
Westpac customers can get help by calling 8am-8pm, 7 days a week (Sydney time): 132 558 or can request a callback.
What factors give me more bargaining power when I speak to my lender?
When a lender looks at a borrower, they generally look at three factors, sometimes called the three ‘Ps’:
A borrower is less of a risk and therefore a more attractive prospect when:
They’re a known entity – the lender knows them well and they’ve been a customer for a long time
They always make their repayments on time. A good credit rating goes a long way
They’ve a lot of equity in their home – with a low loan to value ratio (LVR+)
They’ve more than one home loan with the lender or are a repeat customer.
If you can say ‘YES’ to one or more of these factors, you should talk to your lender and ensure the rate offered considers your status as a desirable customer.
4. What happens if interest rates drop during my fixed rate period?
If interest rates drop (or rise, for that matter) during your fixed rate period, it will not affect your repayments as you've locked in your home loan rate for an agreed period, from 1 to 5 years. Locking in your rate has its benefits, especially if rates rise, but also it means you'll know for the fixed period precisely what your repayments will be. The only negative is, of course, if interest rates decrease. If this happens soon after you’ve fixed your loan, you’ll need to ride it out, as breaking your fixed rate period would cost you more in break fees** than the benefits you’d gain from a lower rate.
Should I break my fixed rate period to lock in a lower rate?
It's not a good idea to break a fixed rate period in most cases. The reason is that break costs** will apply, and they can be very costly, especially if you still have over half of your fixed term to go. You'd possibly look to break a fixed period to re-fix if the new rate is significantly lower, and you’ll save by doing so in the long run.
Ask for a break cost quote
Westpac customers can request a quote by calling 8am-8pm, 7 days a week (Sydney time): 132 558 or can request a callback.
What are break costs and when do they apply?
A break cost ** is a fee charged when a fixed interest rate period is terminated before it has expired. Lenders charge break costs to compensate for the loss incurred when wholesale interest rates change. When a lender agrees to lend you money for a fixed period, they obtain the funds from the wholesale money market. The wholesale rate is then secured when the rate is locked in with the borrower.
There are two main reasons that you may be charged a break cost:
If you make extra repayments into your loan account above the prepayment threshold during the fixed period
If you make a change to your home loan during the fixed period. Includes: switching to another lender or product, changing interest rate, or changing your repayment type.
What’s the prepayment threshold?
It’s the amount your lender has specified that you can make in extra payments into your home loan account over a fixed rate period without incurring break costs**. At Westpac, the prepayment threshold for a fixed rate home loan is $30,000 over the fixed term.
5. How do I re-fix my home loan?
Every lender will have a method for you to follow. In most cases, they'll send you a pre-expiry offer, which you can accept before your current fixed rate term ends. Your lender will provide instructions on what to do.
How can I re-fix my home loan if my previous fixed period has already expired?
At Westpac, if your fixed rate period has expired and you’ve switched to a variable rate, you can re-fix your home loan in three easy steps:
Re-fix my home loan
Westpac customers can get help to re-fix a home loan by calling 8am-8pm, 7 days a week (Sydney time): 132 558 or can request a callback.
Things you should know
Credit Criteria, fees and charges apply. Terms and conditions available on request. Based on Westpac's credit criteria, residential lending is not available for Non-Australian Resident borrowers.
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice.
#Premier Advantage Package: Conditions of Use and $395 annual package fee applies. You must either hold or be approved for a Westpac Choice transaction account in order to qualify and continue to receive the benefits of the Premier Advantage Package. Applicants must have a Westpac Choice transaction account linked to the home loan at the time of settlement and must keep this account open for 60 days after settlement. Before deciding to acquire a Westpac Choice account, read the terms and conditions, and consider whether the product is right for you. Tax consequences may arise from this promotion for investors and customers should seek independent advice on any taxation matters.
Premier Advantage Package Conditions of Use (PDF 88KB)
Repayment holiday: Conditions, eligibility and suitability criteria apply.
- Reduced loan repayments: reduction of up to 50% available for up to 6 months on variable home loans held with us for over 12 months. It is important to understand that at the end of the reduced repayment period, the repayment amount will increase to adjust for the reduced repayments. This ensures that the loan is still repaid within its original term. Read the disclosure documents for your selected product or service before deciding if this option is right for you.
- Mortgage repayment pause: available for up to 6 months on variable home loans held with us for over 12 months.
- Parental leave: if you’ve held your variable home loan with us for over 12 months, you could be eligible to reduce your home loan repayments up to 50% for up to 12 months while on maternity or paternity leave, subject to approval.
^Redraw facility: if you have ‘available funds’ (you’re ahead on your home loan repayments) and you’ve activated your redraw facility, you’re free to redraw them with no redraw fee. Read our Redraw Authority form (PDF 66KB) for full details. Redraw will not apply if you have a Bridging Loan.
**Break costs on fixed loan prepayments and switching: customers can make total prepayments of up to $30,000 (cumulative) for fixed loans, without costs or fees applying. You may incur a break cost and administration fee if your prepayments exceed this threshold, or if at any time before the end of a fixed rate period you switch to another product, interest rate (fixed or variable) or repayment type.
Fixed rate home loan: The Bank will apply the fixed rate that is available at the loan settlement date, unless the customer locks a fixed rate in on the loan using our Rate Lock feature. The
Fixed Rate - Lock-In fee is 0.10% of the loan amount. At the end of the fixed rate period the interest rate will convert to the applicable variable home loan interest rate unless a new fixed rate term is selected and then the fixed rate is determined two business days prior to the refix. Interest rate(s) displayed is for Australian Residents only. Rate lock is not available for progress draw loans under the construction option.
+LVR stands for the initial loan to value ratio at loan approval. LVR is the amount of your loan compared to the Bank’s valuation of your property offered to secure your loan expressed as a percentage. Home loan rates for new loans are set based on the initial LVR and don’t change because of changes to the LVR during the life of the loan.
Rate Lock: The Bank will apply the fixed rate that is available at the loan settlement date, unless the customer locks a fixed rate in on the loan using our Rate Lock feature. The
Fixed Rate - Lock-In fee is 0.10% of the loan amount. At the end of the fixed rate period the interest rate will revert to the applicable variable home loan interest rate unless a new fixed rate term is selected and then the fixed rate is determined two business days prior to the refix.