When to Refinance from Fixed to Variable Rate

Your fixed rate period is ending, and you're wondering whether to move to a variable rate or lock in again.

The decision depends on three things: what you're paying now, what variable rates are sitting at, and whether you need features your current loan doesn't offer. Most fixed terms ending now were locked in during the low-rate period a few years back, which means the revert rate you're about to land on is likely higher than what you could secure by switching to a competitive variable product. Add in the flexibility of an offset account or redraw facility, and the case for refinancing often writes itself.

Why Duncraig Homeowners Are Switching to Variable

Variable rates give you flexibility that fixed products don't. You can make extra repayments without penalty, link an offset account to reduce the interest you're charged, and redraw funds if your circumstances change. For households in Duncraig where dual incomes are common and offset balances can sit reasonably high, that flexibility translates directly into interest saved and cashflow improved.

Consider a household coming off a fixed rate of 2.5% and reverting to 6.8% on their current lender's standard variable product. If they hold a loan amount of $600,000 and could access a variable product at 6.1% with an offset account elsewhere, the difference in monthly repayments would be around $280. That's before factoring in any offset balance, which could reduce the effective rate further.

Fixed Rate Break Costs: How the Calculation Works

If you're still inside your fixed term and want to switch early, you'll likely face break costs. These are calculated based on the difference between your fixed rate and the wholesale rate your lender can currently get for the remaining term. If rates have risen since you fixed, the break cost is often zero or minimal. If rates have fallen, it can run into the thousands.

Lenders use different formulas, but the principle is the same: they're recovering the funding cost difference. Before making any decision to exit early, ask your current lender for a discharge estimate that includes any break cost. Then compare that figure against the interest you'd save by moving to a lower variable rate over the remaining months of your fixed term. In many cases, waiting until the fixed period ends makes more financial sense than paying to leave early.

What You Gain by Moving to Variable Now

Offset accounts are the main drawcard for most people switching from fixed to variable. Every dollar in your offset reduces the loan balance on which interest is calculated, without locking that money away. If you're holding savings for a renovation, a vehicle purchase, or just an emergency buffer, an offset lets that money work for you while staying accessible.

Redraw is another option, though it's not the same thing. Redraw lets you access extra repayments you've already made, but some lenders restrict how often you can do it or charge fees. Offset accounts give you instant access without conditions. For Duncraig residents juggling school fees, rates, and the occasional trip up north, that liquidity matters.

A loan health check will show you exactly how much you could save by switching, and whether your current loan structure still makes sense for where you are now.

When Refinancing Doesn't Make Sense

Not every situation calls for a switch to variable. If you're planning to sell within the next 12 to 18 months, the cost and effort of refinancing may outweigh the benefit. Settlement typically takes four to six weeks, and while you won't pay application fees with most brokers, you will cover valuation costs and potentially discharge fees from your current lender.

If your loan balance is below $200,000 and you're not using an offset or making extra repayments, the dollar saving from a slightly lower rate may not justify the time involved. Run the numbers first. If the monthly saving is under $100 and you're not gaining features you'll actually use, staying put might be the right call.

Refinancing to Access Equity for Investment

Switching to variable can also open the door to accessing equity if you're looking to buy an investment property or fund another project. Duncraig's median values have held consistently, and if you've owned for more than a few years, you're likely sitting on usable equity. Variable products make it simpler to restructure your lending, split your loan into portions, and quarantine the investment debt for tax purposes.

As an example, a homeowner with a $500,000 loan and a property now valued in the high sevens could access up to 80% of the property's value, minus the existing debt. That might release $100,000 or more, depending on the valuation. Moving to a variable structure as part of that process gives you the flexibility to service both loans using offset accounts and manage repayments across multiple properties without being locked into a fixed term that doesn't suit the new scenario.

If you're considering this route, an investment loan structure should be set up properly from the start to keep your deductions clean and your lending scalable.

The Refinancing Process: What Actually Happens

Once you've decided to move forward, the process is fairly contained. You'll need to provide income evidence, a current valuation will be organised, and the new lender will assess your application based on your current financial position. Approval usually takes a few days to a week, and settlement follows within four to six weeks after that.

Your existing lender will provide a payout figure that's valid for a set period, and the new lender will arrange settlement directly. You don't need to find a new property or move house, the whole process happens behind the scenes while you stay in place. If your fixed term is ending in the next 90 days, it's worth starting the conversation now so the new loan can settle around the time your current term expires.

For a full breakdown of what's involved and how long each stage takes, the refinancing page covers the detail.

Choosing the Right Variable Product for Your Situation

Not all variable loans are structured the same way. Some come with offset accounts, some don't. Some allow unlimited extra repayments, others cap them annually. Some offer rate discounts if you hold a package with the lender, others keep the product standalone. The right structure depends on how you use your loan.

If you're parking surplus income in an offset and want access to that balance whenever you need it, prioritise a product with a full offset and no withdrawal restrictions. If you're making lump sum repayments and won't need to pull funds back out, a product with redraw and a slightly lower rate might suit. If you're planning to access equity in the next year or two, avoid loans with high refinancing exit fees or valuation restrictions.

We regularly see households in Duncraig move from a basic variable product to a packaged loan that includes offset, redraw, and split loan options for less than they were paying on their revert rate. The difference in features can be significant, even when the headline rate looks similar.

What Happens If You Do Nothing

When your fixed period ends, your loan automatically moves to your lender's standard variable rate. This is almost always higher than the rate you'd get by actively refinancing or renegotiating. Some lenders will offer a retention rate if you call and ask, but it's rarely as competitive as what's available if you're willing to move.

Staying on the revert rate can cost you hundreds of dollars a month, and over a year that adds up quickly. If your lender knows you're not shopping around, there's little incentive for them to offer you anything different. The longer you wait, the more you pay.

If you're not sure whether your current loan still fits, or you want to see what else is available, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions