The easiest way to switch from fixed to variable

When your fixed rate period ends, your loan automatically rolls onto your lender's standard variable rate. That rate is often higher than what new customers get, and it might not come with the features you actually need.

The decision isn't just about chasing a lower number. It's about whether a variable rate loan gives you the flexibility and access you've been missing, and whether your current lender's revert rate makes sense compared to what's available elsewhere.

Why refinance from fixed to variable instead of refixing

Variable rates give you access to offset accounts, unlimited extra repayments, and the ability to redraw funds without penalties. Fixed loans typically restrict or remove these features entirely.

Consider someone in Mount Eliza who fixed at 2.1% three years ago and is now reverting to their lender's standard variable rate of around 6.8%. They've been making the same repayment throughout the fixed period, but they had no offset account and couldn't make extra repayments without triggering break costs. Switching to a variable rate at 6.3% with a full offset account means they can park their savings and reduce the interest charged each day, rather than watching it accumulate on the full loan balance.

Refixing might sound safe, but it locks you in again for another two to five years. If rates drop during that time, you're stuck paying the higher fixed rate or facing break costs to exit early. If your circumstances change and you need to access equity or sell, you're penalised for it.

What happens when your fixed rate expires

Your lender will send you a notice 30 to 90 days before your fixed term ends. That notice will outline the rate you'll revert to, which is almost always their standard variable rate rather than a discounted or promotional rate.

Most borrowers don't realise how much that revert rate differs from what the same lender is offering new customers. The gap can be 0.5% to 1% or more, which on a loan amount of $600,000 translates to an extra $3,000 to $6,000 per year in interest.

You're not obligated to accept that revert rate. Refinancing to a new lender or negotiating with your current lender before the fixed term ends gives you control over what happens next, rather than letting it happen by default.

Fixed rate break costs vs switching at expiry

If you're still within your fixed rate period, exiting early usually triggers break costs. These are calculated based on the difference between your fixed rate and the current wholesale cost of funds for the remaining term. If rates have gone up since you fixed, the break cost can be substantial.

Switching at expiry avoids break costs entirely. You're free to refinance to any lender without penalty, which is why timing your refinance application around your fixed rate expiry makes financial sense.

Some lenders will let you lock in a new rate up to 90 days before your fixed term ends. This means you can start the refinance process early, secure a rate, and have the new loan settle on or just after your fixed term expires without paying a cent in break costs.

Offset accounts and redraw facilities on variable loans

An offset account sits alongside your home loan and reduces the balance on which interest is calculated. If you have a loan amount of $500,000 and $50,000 in your offset account, you only pay interest on $450,000.

Redraw lets you access extra repayments you've made, but it's not the same as an offset. Redraw is controlled by the lender, and some will charge fees or limit how often you can access it. Offset accounts give you immediate access through your own transaction account, and the funds remain yours without restriction.

Most competitive variable rate loans come with full offset accounts at no extra cost. If you're sitting on savings in a separate account earning minimal interest while paying 6% or more on your mortgage, an offset account closes that gap immediately. The tax benefit is also real: offset accounts reduce your interest without generating assessable income, unlike a savings account where you pay tax on the interest earned.

Refinancing to access equity while switching rates

If you're refinancing anyway, it's worth considering whether you need to access equity at the same time. This is common for buyers looking to fund a deposit on an investment property or complete renovations without using a personal loan.

The refinance process allows you to increase your loan amount based on your property's current valuation and your borrowing capacity. Lenders will typically allow you to borrow up to 80% of your property's value without requiring lender's mortgage insurance, though this depends on your income and existing debts.

In our experience, clients coming off fixed rates are often surprised by how much equity has built up, particularly in areas like Mount Eliza where property values have grown steadily. A property valuation is required as part of the refinance application, and that valuation determines how much equity you can access. Releasing equity while refinancing to a variable rate means you only go through the application process once, rather than refinancing now and then applying for a separate top-up loan later.

How long the refinance process takes

From application to settlement, refinancing typically takes three to six weeks. That timeline depends on how quickly you provide documents, how long the lender takes to assess and value your property, and whether there are any complications with your financial situation or the property itself.

If your fixed rate is expiring in 60 days, that's enough time to complete a refinance and have the new loan settle before you roll onto the revert rate. Starting earlier gives you more room to compare options and negotiate, but leaving it until after your fixed term has already expired just means you're paying the higher revert rate while the new loan is processing.

Some lenders are faster than others. A straightforward refinance with clear financials and a standard property can settle in three weeks, while more complex scenarios involving self-employment, multiple properties, or rural land can take longer. Your broker will give you a realistic timeline based on your specific situation and the lender you're moving to.

Refinancing to consolidate debt into your mortgage

If you're carrying personal loan debt, car loan debt, or credit card balances with interest rates between 8% and 20%, consolidating that debt into your mortgage at a lower variable rate reduces your overall interest cost and simplifies your repayments.

The downside is that you're converting short-term debt into a 25 or 30-year loan term. Unless you maintain the same repayment amount you were making on those debts after consolidation, you'll end up paying more interest over the life of the loan even though the rate is lower.

Consolidation works if you use the cashflow improvement strategically - either by keeping your total repayment the same and paying down the mortgage faster, or by redirecting the freed-up cashflow into an offset account where it continues to reduce your interest. Consolidating and then spending the extra cashflow just shifts the debt without solving the underlying problem.

Switching lenders vs staying with your current lender

Your current lender might offer you a retention rate if you threaten to leave, but it's rarely as competitive as what you'd get by actually refinancing to a new lender. Retention rates are often conditional, time-limited, or come with conditions that aren't disclosed upfront.

Switching lenders gives you access to competitive rates, offset accounts, and sometimes cashback offers or fee waivers that your current lender won't match. The refinance process involves a full credit assessment, property valuation, and settlement, but the ongoing benefit usually outweighs the short-term effort.

That said, if your current lender offers a genuinely competitive rate with the features you need and you're not looking to access equity or consolidate debt, it's worth having a conversation with them before committing to a full refinance. Just make sure the offer is in writing and compare it against what's available in the market before you decide. A loan health check gives you that comparison without obligation.

Refinancing from fixed to variable isn't about reacting to your fixed rate expiry. It's about setting up a loan structure that works for the next few years, not just the next few months. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions