Refinancing to Switch from Variable to Fixed Rates

Variable rate home loans fluctuate with market conditions, which has meant significant payment increases for many Australian borrowers over recent months.

If your monthly repayments have climbed to a point where you're reconsidering your loan structure, switching from a variable to a fixed interest rate through refinancing can provide payment certainty for a set period. The decision hinges on your tolerance for ongoing rate changes, your budget constraints, and how long you plan to hold the property. For South Perth homeowners who value predictable monthly expenses and want protection against further rate rises, locking in a fixed term may align with those priorities.

Why Borrowers Consider Switching to Fixed Rates

The primary reason to move from variable to fixed is payment certainty. When you lock in a rate, your repayments remain unchanged for the fixed rate period, typically between one and five years. This shields you from any further rate increases during that time.

Consider a borrower in South Perth with a $550,000 loan amount on a variable rate. Their monthly repayment has increased three times in the past year as the Reserve Bank adjusted rates. Each increase added pressure to their household budget, making it difficult to plan other expenses. By refinancing to a fixed rate, they locked in their repayment at a known figure for three years, giving them breathing room to adjust their finances without worrying about further increases.

The trade-off is that you also miss out if rates fall during your fixed period. If the market moves downward, you remain at the higher locked rate unless you're willing to pay break costs to exit early. For borrowers who prioritise stability over the possibility of savings, that trade-off is often worthwhile.

When Does Refinancing to Fixed Make Financial Sense

Refinancing to fixed makes sense when you value certainty over flexibility and believe rates will either rise or remain elevated during the period you intend to fix.

If you're already struggling with recent payment increases and your budget can't absorb another rise, a fixed rate provides immediate relief by capping your exposure. For families in South Perth, where median property values have remained strong near the river precincts and schools like Wesley College attract young families, predictable repayments can align with school fee planning and other fixed household commitments.

On the other hand, if you expect to sell the property within the fixed period or believe rates will decline, a variable rate or a split structure may suit you better. Refinancing involves application costs, property valuation fees, and sometimes discharge fees from your current lender. These costs need to be weighed against the benefit of rate certainty. In our experience, borrowers who plan to hold the property for at least the full fixed term and who have limited capacity to absorb further rate rises tend to see the most value in this switch.

The Refinance Application Process for Switching Rate Types

Switching from variable to fixed requires a full refinance application with a new or existing lender. The lender will reassess your financial position, including income, expenses, employment status, and property valuation.

Your property will need to be revalued to confirm it meets the lender's lending criteria. For South Perth properties, particularly those near the Angelo Street café strip or river foreshores, valuations have generally held firm, which supports refinancing without needing to inject additional equity. If your property has increased in value since you purchased, you may also have the option to access equity for other purposes, though that's a separate consideration from the rate switch itself.

The lender will review your loan amount, your repayment history, and your current credit position. If your circumstances have changed since your original loan, such as a reduction in income or an increase in other debts, this may affect your ability to refinance. Assuming your financial position is stable or improved, the process typically takes two to four weeks from application to settlement. During that time, your existing variable rate continues to apply until the new fixed rate loan settles.

How Long Should You Fix For

Fixed rate periods typically range from one to five years. Shorter fixed periods offer some certainty without locking you in too long, while longer periods provide extended protection but less flexibility.

Choosing the right term depends on how long you expect current rate conditions to persist and your own plans for the property. If you believe rates will stabilise or decline within two years, a shorter fixed period may be appropriate. If you expect rates to remain elevated for several years, a longer fixed term provides extended protection.

As an example, a borrower with school-aged children in South Perth might choose a three-year fixed term that aligns with their child's progression through primary school, knowing their household budget needs to remain stable during that period. They plan to reassess once the fixed period ends, at which point they can choose to refix, revert to variable, or refinance again depending on market conditions at that time.

One consideration is that longer fixed terms often carry slightly higher rates than shorter ones, reflecting the lender's pricing for extended certainty. Balancing the rate differential against the length of protection is part of the decision process.

What Happens When Your Fixed Rate Period Ends

When your fixed rate period ends, your loan automatically reverts to the lender's standard variable rate unless you take action beforehand. That revert rate is often higher than the discounted variable rates offered to new borrowers, which is why reviewing your loan before the fixed period expires is important.

Most lenders contact you a few months before expiry to discuss your options, which include refixing at a new rate, switching to variable, or refinancing to another lender. At that point, you can reassess whether fixing again makes sense based on the current market, your financial situation, and your plans for the property. A loan health check at this stage helps you compare what's available and decide whether your current lender still offers the right structure for your needs.

If rates have declined since you initially fixed, moving to a variable rate at expiry may provide lower repayments. If rates have risen or remain volatile, refixing could make sense again.

If you're weighing whether to lock in a fixed rate now or wait for market conditions to shift, the decision comes down to your capacity to manage further payment increases and your outlook on where rates are heading. Call one of our team or book an appointment at a time that works for you to discuss your loan structure and whether refinancing to a fixed rate aligns with your financial priorities.

Frequently Asked Questions