What happens when your fixed rate ends?

A fixed rate is the part of a home loan that sits still. You choose a term, the repayment stops moving, and for a while the cash rate can do whatever it likes. One borrower waiting for a 4.99% fixed rate to end, u/martinilauz, put it plainly this week: they fixed because they "really wanted the same amount going out each repayment".

The term ends, and the loan becomes a rate decision again. It rolls onto a variable rate your lender sets, and the first number you see is the lender's own offer. The number worth having is what the rest of the board offers for the same kind of loan.

On the board today, Greater Bank's Great Rate Home Loan is the cheapest variable rate we track, at 5.85% comparison (5.84% advertised). Unity Bank's three-year fix is the cheapest fixed rate, at 6.23% comparison (6.15% advertised). At the other end of the scale, ANZ's standard variable sits at 7.24% comparison and CBA's at 6.72%.

Of the 60 variable loans on the board, 40 are cheaper than the cheapest fixed rate. On a $650,000 loan over 30 years, principal and interest, the cheapest three-year fix costs about $159 a month more than the cheapest variable. The market repriced while those fixed terms ran: Up's two-year fixed rate read 5.18% comparison in November and reads 6.04% today; its variable rate went from 5.20% to 5.95% over the same stretch.

The sharp rates exist to win customers. Lenders compete for borrowers who are still shopping, and a loan that rolls off a fixed term has not gone shopping yet. What the lender offers you at that point is the version of its pricing kept for people who stay.

Your version of these numbers depends on your situation. The sharpest rates are for owner-occupiers paying principal and interest at a loan-to-value ratio (LVR) of 80% or less; above 80%, pricing steps up and lenders mortgage insurance usually enters the picture. Discounts tend to track the size of the loan. And fees sit inside the comparison rate, so a loan that looks 0.10 points cheaper can lose that edge to a package fee.

What we cannot see is the rate your lender will actually put in front of you. That number lives in your contract and in the letter that arrives before the term ends. Where rates go next is open as well. The Board's next decision is on 29 September, and a move would flow through to variable rates across the board. A fixed rate stays where you sign it.

If your term ends soon, the exercise is small. Find the rate on your roll-off letter, and hold it against 5.85%, the best variable rate on our board.

We don't receive commissions or affiliate payments from lenders, and this is general information, not personal advice.