Locking in a rate without calculating the real cost
Most lenders advertise a headline fixed rate, but that figure rarely reflects what you'll actually pay once comparison rates, application fees, and ongoing account fees are included. A rate that looks attractive at 5.79% might end up costing more over three years than a slightly higher advertised rate with lower fees and a functional offset account.
Consider a homeowner in Templestowe with a loan amount around $600,000. They're comparing two fixed rate options: one at 5.79% with a $995 application fee and no offset, and another at 5.89% with a $350 fee and a full offset. If they typically maintain $30,000 in their offset, the second option delivers lower overall interest costs despite the higher rate. The difference over a three-year fixed term can easily exceed $4,000.
This is where a loan health check becomes particularly useful. It's not just about the interest rate itself, but how the loan structure aligns with how you actually manage your mortgage and savings.
Fixing your entire loan when a split would suit you
You don't have to choose between fixing everything or keeping everything variable. A split loan lets you fix a portion for rate certainty while keeping the rest variable for flexibility. Many Templestowe homeowners refinance with a fixed-variable split because it hedges against both rising and falling rates.
In our experience, clients who maintain irregular income streams or expect lump sum payments often benefit from keeping 30% to 50% of their loan variable. That portion can be paid down without penalty, while the fixed portion provides stable repayments on the bulk of the debt.
Say you're refinancing a $700,000 mortgage. You could fix $500,000 at a three-year rate and leave $200,000 variable with an offset account attached. If you receive a bonus or inheritance, you can pay down the variable portion or park funds in the offset without triggering break costs. If rates fall, the variable portion adjusts downward. If they rise, the fixed portion protects you.
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Choosing a fixed term that doesn't match your plans
Fixed rate home loans typically come in one, two, three, four, or five-year terms. The longer the term, the higher the rate, but also the longer your protection from rate movements. Choosing the wrong term can leave you stuck in an uncompetitive rate or force you to pay break costs if your circumstances change.
Templestowe sits in a suburb where families often upgrade within five to seven years, particularly as children grow and schooling needs shift. If you're planning to sell or significantly change your loan structure within three years, locking in a five-year fixed rate rarely makes sense. You'll either pay break costs when you refinance early, or you'll miss out on lower rates if the market shifts.
Match the fixed term to your actual timeline. If you're planning to access equity for investment or upgrade your property within two years, a one or two-year fix gives you rate certainty without long-term commitment. If you're settled in Templestowe long-term and want maximum stability, a longer term might justify the slightly higher rate.
Ignoring what happens when the fixed period ends
When your fixed rate period ends, your loan automatically reverts to your lender's standard variable rate unless you take action. That revert rate is almost always higher than the variable rates offered to new customers, sometimes by 0.50% to 1.00% or more.
A $650,000 loan reverting to a rate that's 0.70% higher than current variable offerings will cost you an extra $4,500 per year in interest. Many homeowners don't realise this happens until they see their repayment jump after their fixed rate expiry.
Set a reminder six months before your fixed term ends. That gives you time to review whether you want to refix, switch back to variable, or refinance to a lower rate with another lender. Waiting until the fixed period has already ended means you're paying the inflated revert rate while you shop around.
The refinance process typically takes four to six weeks from application to settlement, so starting early means you can move to a new rate the day your fixed term ends, rather than paying the revert rate for weeks or months while your application is processed.
Call one of our team or book an appointment at a time that works for you. We'll walk through your current loan structure, clarify what switching to a fixed rate will actually cost, and help you structure a refinance that suits how you use your mortgage, not just how it looks on paper.
Frequently Asked Questions
Should I fix my entire home loan or just part of it?
A split loan often works well if you want rate certainty on most of your debt but need flexibility for irregular repayments or offset access. Many Templestowe homeowners fix 50% to 70% of their loan and keep the rest variable to avoid break costs on lump sum payments.
What happens when my fixed rate period ends?
Your loan automatically reverts to your lender's standard variable rate, which is usually higher than rates offered to new customers. Set a reminder six months before your fixed term ends so you have time to refinance or negotiate a new rate before the revert rate kicks in.
How do I know if refinancing to a fixed rate will actually save me money?
Compare the total cost over the fixed term, not just the advertised rate. Include application fees, ongoing fees, and the value of features like offset accounts. A slightly higher rate with lower fees and an offset can cost less overall than a lower headline rate with high fees and no offset.
How long should I fix my home loan for?
Match the fixed term to your plans. If you expect to sell, upgrade, or access equity within a few years, a shorter fixed term avoids break costs. If you're settled long-term and want maximum rate protection, a longer term may suit you despite the slightly higher rate.
