Your fixed rate is ending - here's what to do before it rolls

Tens of thousands of Australian home loans fixed during 2021 and 2022 are still rolling off this year. If you locked in a 2-3% rate three or four years ago and you're about to roll onto your bank's variable, the next 10 minutes are worth spending. What your lender automatically rolls you onto often isn't the best rate they could offer - and the difference can run into thousands of dollars a year

Here's what to know before your fixed term expires.

What actually happens when a fixed rate expires

When your fixed term ends, your loan doesn't disappear or restart. It typically rolls onto your lender's standard variable rate, or onto whichever variable rate you nominated when you first fixed. For most borrowers coming off a 2021 or 2022 fix, that means a sharp jump in repayments compared with what you've been paying.

A few things tend to happen automatically:

- Your interest rate switches from fixed to variable on the day the fixed term ends.

- The new rate is whatever your lender's variable is set to at that moment.

- Repayments are recalculated and direct debits adjust, often with limited notice.

- Features that weren't available on your fixed loan, like an offset or redraw, may or may not become accessible depending on your loan type.

Nothing dramatic happens on the day. A lot changes at once, quietly. And the rate you end up on is rarely the rate you would negotiate if you walked in as a brand-new customer tomorrow.

Why the variable you roll onto may not be the bank's best rate

Here's the part most borrowers don't realise. The variable rate your bank applies when your fixed loan rolls off is usually their advertised standard variable - not the discounted rate they are offering new borrowers down the road.

Most major lenders hold a quieter retention or "shopback" rate they will offer if a customer asks, signals they are looking around, or comes in through a broker. That margin can be in the order of 0.3-0.6% lower than the default rollover rate. On a $750,000 loan, that gap can mean roughly $130-$260 in repayments every month, simply because nobody negotiated.

This isn't a bank failing you. It is how retail lending works. The customers who ask, get. The ones who don't, pay the standard rate. A broker's job is to do the asking on your behalf, and if your current lender won't sharpen their pencil, to know which lender will.

3 questions to ask before you switch

If you are tempted to refinance the moment your fixed term ends, slow down. Refinancing is not always the right move. Sometimes the better outcome is staying with your existing lender at a sharper rate. Three questions worth asking first.

1. What rate is my lender offering new customers right now?

This sets the benchmark. If your current bank is advertising one rate to new borrowers and rolling you onto something noticeably higher, that is the first conversation to have - with them, not with a competitor. Many borrowers are surprised by how much movement is available with one well-framed phone call.

2. What are the real costs of switching?

Refinancing is not free. There are discharge fees from your current lender, application and possible settlement costs at the new lender, and time spent re-documenting income, expenses and assets. A genuinely better rate may cover those costs within six to twelve months. A marginally better one may not. Run the numbers properly before you commit.

3. Is rate the right thing to optimise for?

This is the question most people skip. The right move is sometimes not the lowest rate - it is the structure that suits where your life is heading. Offset accounts if you are saving cash, redraw if you are paying down, split loans if you are also investing, interest-only periods if you are between properties. Rate alone does not answer those questions.

Structure matters as much as rate

A loan with a marginally higher rate but the right structure regularly beats a cheaper loan that does not fit your situation.

Common scenarios we see in the Shire and across Sydney:

- A borrower on a 0.1% lower rate, but with no offset account, paying more in interest each month than the borrower on a slightly higher rate with $80,000 sitting in their offset.

- An investor chasing a headline rate, but stuck on principal-and-interest when interest-only would have suited their tax position better.

- A refinancer who saved a small amount on rate, only to find the new lender's servicing policy stopped them borrowing again 18 months later when they wanted to upgrade.

Rate is the most-marketed feature of a home loan. It is rarely the most important

A free rate review is the easiest place to start

If your fixed rate is rolling off in the next 90 days - or has already rolled and you have quietly accepted the higher repayment - it is worth running the numbers past someone whose job is to know what is actually available.

At Sutherland Mortgage Group, we offer a free rate review for any borrower whose fixed term is ending or has recently ended. It takes about 20 minutes. We look at your current rate, what your lender could offer if asked, and what is available across the rest of the market. No commitment, no obligation - just a clear picture before you decide.

To book a rate review, get in touch with the team at SMG.

This information is general in nature and does not take into account your personal objectives, financial situation or needs. Consider whether it is appropriate for you and seek advice before making any decisions. Lending criteria, terms and conditions apply.