When the fixed rate on your home loan ends
When your home loan comes to the end of its fixed interest rate period, you have the option of re-fixing your home loan, or changing to a variable rate. Unless the bank is instructed otherwise, your home loan will automatically switch to a standard variable (floating) rate.
If you’re planning to re-fix your loan, you can choose to “lock” in a new current fixed interest rate. You can lock in that rate for up to 60 days before your loan comes to the end of its fixed rate term. So for example, if your fixed interest rate expires on 1 November, you can rate lock a new current fixed interest rate anytime after 2 September. This rate lock provides certainty, however it could come with a cost if you later change your mind and want to make changes before the new current fixed interest rate is applied.
When interest rates are rising, we tend to lock in a new rate as soon as possible. However when rates are dropping, it may be beneficial to wait until the last possible moment before locking in a new interest rate. Some people even choose to go onto a floating rate, but as the floating rate is higher than a fixed rate, sometimes the cost of waiting is not worth it. Others opt to refix their loan for the shortest term, which is six months. Whilst this is cheaper than floating, it is still worth weighing up this cost to make sure it is beneficial.
The bank will use their normal marketing tools to try to get you to lock in your rate ASAP like normal, but waiting may be in your favour.
Let me know your preference and we can work together to achieve the best outcome for you. If you’d like to wait until closer to your expiry let me know and we can monitor it together.