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Fixed-Rate Home Loans
Written by
Kervin Mathew
Edited by
Ellie Garran
Reviewed by
Sam HymanWe’ve partnered with Aussie, who’ve helped 1.5 million Australians and counting
iSelect Mortgages Pty Ltd is a credit representative (Credit Representative 400540) of Lendi Group Distribution Pty Ltd (Australian Credit Licence 246786). iSelect Mortgages Pty Ltd receives a commission from Lendi Group Distribution Pty Ltd, the licensee for each new customer account created and for each home loan submitted through this service. Learn more.
What is a fixed-rate home loan?
A fixed home loan is a bit like cross-country skiing – you keep going at a steady pace, while the people on variable rates deal with the thrilling dips and uphill battles of the slopes. Fixed-rate home loans are fixed on an interest rate for a certain period – generally up to five years. They’re a popular type of home loan for people who are on a strict budget or like to plan ahead.
Could a fixed-rate home loan benefit me?
Ultimately, a fixed-rate home loan might benefit you if your situation calls for stability with repayments. Its fixed interest rates typically appeal to someone who prefers to stay on top of their finances and away from the drama of fluctuating interest rates. It’s also likely to be more appealing if rates are low at the time you’re applying for a loan.
Features and benefits of fixed-rate home loans
Locked-in interest rates
A fixed interest rate helps you dodge any serious interest rate rises that happen over your fixed-rate period.
Safety and stability
You’re safeguarded from any sudden surprises related to repayments, as they’re set in stone for as long as your rate is fixed.
Better basis for budgeting
Because you know what your repayments will be over a predetermined period, you can be more confident in budgeting for the future.
Flexibility with expenses
Certainty around home loan repayments may give you a bit of wiggle room with other purchases, like a family car with a sunroof.
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Here’s how it works:
Get acquainted
Tell Aussie about yourself and what you’re looking for. They’ll work their magic and show you a range of loan options that tick the boxes.
Find what fits
Compare a range of home loan products from 25+ lenders online. Aussie’s team of home loan specialists will be there to answer your questions.
Get sorted
Sit back and relax. Once you’ve picked a home loan, Aussie will step in to support and guide you, from application to settlement.
Fixed-rate home loans explained
Learn how to go about finding a fixed-rate home loan and what to expect when you get one.
What is the average rate of a fixed-rate home loan?
If you took out a standard, no frills fixed-rate home loan in June 2025, you’d be looking at average interest rates ranging from 5.65% to 6.06% over a five-year term. This is a stark contrast to the dreamlike 2% rates we got a taste of in the early 2020s,1 demonstrating that market conditions can have a big impact on rates.
Of course, the interest rate on your fixed-rate home loan would depend on your lender and the loan package, whether you’re buying a residential or investment property, and the LVR. This graph covers fixed-rate home loans for owner-occupied homes with principal and interest repayments and a loan-to-value ratio (LVR) of up to 80%. Typically, higher interest rates are applied if the LVR is higher than 80% or if the loan is for an investment property.
Calculate your mortgage payments
If you have a general idea of how home loans work but think you ought to know more, have a squiz at our handy mortgage calculator. It’s a great way to make sense of how different borrowing scenarios would pan out. You can customise it to your situation, hypothetical or not.
What’s the difference between a fixed- and variable-rate home loan?
Fixed-rate home loans
Fixed home loans give you more control over how much you pay and for how long because you get to lock in the interest rate over a certain period. But that means you’re also stuck with what you have when the grass seems greener on the other side.
- Certainty around repayments
- Protection from interest rate rises
- Ease around budgeting and financial planning
- Penalties for early repayment or refinancing
- Fewer features and limited flexibility
- Ignores increases and decreases in cash rate
Variable-rate home loans
With a variable-rate home loan, you’ll find that you have more flexibility, but that comes at the cost of uncertainty around interest rates and control over your budget. So, before you decide to go with one, it’s important that you weigh up the benefits and downsides.
- Can make additional repayments
- Interest rates can go up or down
- Budgeting can be a challenge
- Easy refinancing at any time
- More potential loan features
- Subject to market conditions
What should I consider with a fixed-rate home loan?
Fixed term duration
Fixed-rate home loans can come with terms of one to five years, or, in rarer cases, 10 years. You could refinance with another fixed-rate home loan, but there’s no guarantee that you’ll be getting the same interest rate that you’ve had.
Revert rate
When you’re at the end of your fixed-rate home loan term, you’ll have to revert to the lender’s standard variable rate. Depending on how lucky you are, this can be lower or higher than the rate you’ve been paying.
Break fees
If you’ve decided to sell your property, pay off your home loan early, or even refinance before term end, you’re essentially breaking the contract you have with your lender. In such instances, you may need to pay a break fee as a penalty.
Repayment flexibility
You can expect less flexibility with repayments on fixed-rate loans. That means you may not be able to make additional repayments or redraw funds. And if you do, there may be fees involved.
Helpful tip
Purchasing a home is one of the biggest financial decisions you will ever make so it’s important to choose a home loan that suits your financial situation, preferences and most importantly, your financial goals. If you are someone that likes certainty and the ability to plan ahead, then you could benefit from the stability a fixed rate home loan provides. Fixed rate loans are great for helping you stick to a budget, however it is also important to be aware of any limitations or penalties, particularly around extra repayments and break fees.
Canna Campbell
Financial Planner & Founder of SugarMamma TV
Frequently asked questions
What are some disadvantages of fixed-rate home loans?
Fixed-rate home loans are usually locked in for certain number of years. So, you don’t want to work out half-way through that it was the wrong choice. Before signing up, make sure you consider some of the potential disadvantages:
- Higher interest rates: If the official cash rate decreases, your interest rate will remain the same. This can be a bit annoying, particularly if your neighbour is on a variable-rate home loan and won’t stop bragging about the drop.
- Break costs: If you want to refinance or pay off your loan early, you may have to break your contract and pay a fee.
- Restrictions on additional payments to your loan: When it comes to fixed-rate home loans, some lenders won’t let you make extra repayments, or they might cap them at a certain amount or charge a fee.
Can I split my loan between fixed and variable interest rates?
It depends on your lender, but some lenders may allow you to split your loan between fixed and variable interest rates. This means you’d be able to assign a certain portion of the loan – say, 50% – to the fixed interest term, while leaving the rest variable. This might afford you some savings if interest rates decrease.
Can the interest rate change between application and settlement?
Yes. When you apply for a fixed interest rate, your rate could vary between application and settlement if interest rates change. But you might be offered a rate lock, which locks in that rate and can come with a rate lock fee. If you do employ the rate lock, your rate won’t change.
The rate lock fee is usually calculated at 0.15% of the loan amount and can lock in an interest rate for up to 90 days, although the terms and conditions can vary between lenders.
What happens after my fixed term expires?
When you sign on to a fixed-rate home loan, you’re usually locked in at that interest rate for around one to five years. Once this term finishes up, your loan will change to a variable-rate loan. Or if you like, you can either sign up for another fixed-term contract or jump ship to a different variable-rate loan.
What restrictions do fixed-rate home loans typically have?
Before deciding on a fixed home loan, you should check with your lender if there are any restrictions. Some of these may include:
- Limits on making extra repayments: Some providers let you make extra repayments so you can pay off your home loan more quickly. But not many fixed-rate loans allow this.
- Not being able to withdraw any additional payments you’ve made: Some providers actually allow you to take back the extra repayments you’ve made. This is called a ‘redraw facility’. But again, most fixed-rate loans don’t come with a redraw facility.
- Not being able to link an offset account to your loan: Not sure what that is? Well, to put it simply, an offset account is a type of savings account which is directly linked to your home loan. The balance of your savings is deducted from your home loan, reducing your interest payments. Some lenders offer fixed-rate loans with this feature, but this can be less common.
- Having to pay a break fee: if you refinance, make extra repayments, or sell your house you may have to pay a ‘break fee’.
How do I compare fixed-rate home loans?
So, you’re on the hunt for a fixed-rate home loan. What kinds of features should you look for?
- A low interest rate: The lower the interest rate, the more money you’re likely to save, especially when it comes to a fixed-rate home loan. Remember, the rate you sign up for is the rate you’ll have for the duration of the term
- Loan fees: Are there any annual or ongoing fees you need to be aware of? Make sure you know exactly what you’re required to pay each month
- The term length: This is something you’ll need to decide before signing up. How long you want to hold your rate for – one, two, three, four, five years?
It’s important to compare loans to make sure you end up with one that works for your specific circumstances and budget. And our partner, Aussie, can help with that!
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How can I compare loans?
The good news is there’s lots of competition around, and that means you get to enjoy competitive rates.
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You’re going back into battle! Why not arm yourself with as much knowledge as you can so the ‘spoils’ come to you?
Variable-rate home loans
When you understand how variable-rate home loans work, you might look at them very differently.
Get started on comparing home loans today!
Find a home loan by comparing with iSelect’s trusted partner, Aussie.
iSelect is the trading name of iSelect Mortgages Pty Ltd (ABN 86 148 217 181). iSelect Mortgages Pty Ltd is a credit representative (Credit Representative 400540) of Lendi Group Distribution Pty Ltd (Australian Credit Licence 246786). iSelect provides a referral to Lendi Group Pty Ltd, a Credit Representative of Lendi Group Distribution Pty Ltd (Australian Credit License 246786). iSelect Mortgages Pty Ltd receives a commission from Lendi Group Distribution Pty Ltd, the licensee for each new customer account created and for each home loan submitted through this service.