The Easiest Way to Switch From Fixed to Variable

Your fixed term just ended and the revert rate feels like a gut punch.

Most lenders will roll you onto a standard variable rate that's anywhere from 0.5% to 1.2% higher than what you could access if you shopped around. That difference might sound small, but on a $400,000 loan it can mean paying an extra $2,000 to $5,000 a year in interest alone. Refinancing to a lower variable rate gives you flexibility and puts that money back into your household budget.

Why Fixed Rate Holders Are Moving to Variable

Variable rates give you access to features most fixed loans don't allow. You can make unlimited extra repayments, link an offset account to reduce interest daily, and draw on redraw if you need cash for renovations or emergencies. When your fixed rate expires, those options suddenly become available again, and many borrowers in Launceston and across the state are choosing to lock them in by refinancing rather than accepting whatever their current lender offers.

Consider a couple in Riverside who fixed at 2.1% three years ago and recently came off that term. Their lender's revert rate was sitting at 6.8%, but a competitive variable product through a different lender was available at 6.1%. The rate drop alone would save them around $220 a month, and the offset account they added meant their savings were working against the loan balance every day.

How the Refinance Process Works When Switching Rate Types

You submit a refinance application to a new lender or negotiate with your current one. The new lender assesses your income, expenses, and property valuation just like they would for a new home loan. If approved, they pay out your existing loan in full and you start fresh with the new variable product. Settlement usually takes three to five weeks once the valuation and paperwork are complete.

If you're still inside a fixed rate period, breaking early will trigger break costs that can run into thousands of dollars depending on how rates have moved since you locked in. But if your fixed term has already ended, there's no penalty. You're free to move. That's the window most people use to switch, and it's why we recommend booking a loan health check at least two months before your fixed rate expiry date so you're not scrambling at the last minute.

What You Gain by Moving to Variable After a Fixed Period

Flexibility is the biggest shift. Variable loans let you make extra repayments whenever you have surplus income, whether that's a tax return, a bonus, or savings from a quieter month. Those extra repayments cut into your principal, which reduces the interest you're charged over the life of the loan. An offset account does the same thing, but without locking the money away. Your savings sit in a transaction account linked to the loan, and the balance offsets the interest calculated each day.

In our experience, borrowers in regional Tasmania often prefer offset accounts over redraw because they can access the funds instantly without needing lender approval. If you're self-employed or your income fluctuates, that buffer can make a real difference during lean periods.

When Refinancing to Variable Doesn't Make Sense

If you value certainty over flexibility and you're worried rates might climb further, switching to variable exposes you to that risk. Variable rates move with the market, so your repayments can increase if the Reserve Bank raises the cash rate. Some borrowers prefer to refix for another term, especially if they're on a tight budget and can't absorb an unexpected rise in monthly costs.

Another scenario where staying put might make sense is if your current lender offers a retention rate that's genuinely competitive. Some lenders will negotiate to keep you, and if the rate they offer is within 0.1% to 0.2% of what you'd get elsewhere, the time and effort of refinancing might not be worth it. That's where a quick comparison helps. We regularly see this with borrowers who've built up equity and have strong repayment histories. Lenders know they're low-risk and will often make a counteroffer worth considering.

Offset Accounts and How They Work With Variable Loans

An offset account is a transaction account linked to your home loan. The balance in the offset reduces the amount of interest you're charged without reducing your actual loan balance. If you have a $350,000 loan and $20,000 sitting in your offset, you're only charged interest on $330,000. The interest saved goes straight to paying down your principal faster.

Not every variable loan comes with an offset. Some lenders charge a slightly higher rate to include one, others bundle it in at no extra cost. The value of an offset depends on how much you can keep in the account. If you're living paycheck to paycheck and the account balance hovers near zero, the feature won't deliver much. But if you can park your emergency fund or savings there, the compounding effect over time can shave years off your loan term.

How Long It Takes to Refinance From Fixed to Variable

From application to settlement, expect three to five weeks. That includes the lender ordering a valuation, assessing your income and debts, issuing formal approval, and arranging settlement with your existing lender. If the valuation comes back lower than expected or your financial situation has changed since you first borrowed, the process can stretch out while the lender requests more information.

Timing matters if your fixed rate is about to expire. If you wait until after the expiry date, you'll be paying the revert rate while your refinance application is being processed. Starting the conversation eight to ten weeks before the fixed term ends gives you enough runway to compare offers, lock in a rate, and settle before the revert rate kicks in.

What Lenders Look at When You Apply to Refinance

Income, living expenses, existing debts, and the current value of your property. Lenders use a debt-to-income ratio to assess whether you can service the new loan, and they'll apply a buffer rate of around 3% above the actual rate to stress-test your repayments. If your expenses have increased since you first borrowed, or if you've taken on additional debt like a car loan or personal loan, that can reduce how much the lender is willing to approve.

Property valuations also matter. If your home's value has dropped or stayed flat, you might have less equity than you think, which can affect your loan-to-value ratio and the rate you're offered. In regional areas like the Tamar Valley, valuations can vary depending on recent sales activity and the valuer's familiarity with the suburb. If the valuation comes back lower than expected, it doesn't kill the application, but it might mean you need to provide a bit more equity or accept a slightly higher rate.

Using Refinancing to Access Equity for Other Goals

If your property has increased in value since you bought it, refinancing lets you access that equity without selling. You can use the funds for renovations, investment property deposits, or debt consolidation. The lender will let you borrow up to 80% of your property's current value without paying lender's mortgage insurance, so if your home is now worth more and your loan balance has come down, that gap can be released as cash.

As an example, a borrower in South Launceston with a property now valued at $500,000 and an outstanding loan of $280,000 could potentially access up to $120,000 in usable equity while staying under the 80% threshold. That kind of buffer opens up options, whether it's upgrading the kitchen, buying an investment property, or clearing high-interest debts.

Should You Negotiate With Your Current Lender or Switch

Both options are worth exploring. Call your current lender and ask what retention rates they can offer. If they come back with something competitive, you've saved yourself the hassle of refinancing. If they don't budge or the rate they offer is still well above market, moving to a new lender makes sense.

Some lenders will waive application fees or offer cashback incentives to attract refinance customers. Those perks can offset some of the upfront costs, but they shouldn't be the main reason you switch. A lower ongoing rate and the right loan features will save you more over time than a one-off cash bonus. We regularly see borrowers get distracted by headline offers and miss the fact that the comparison rate is higher than what they're currently paying.

Call one of our team or book an appointment at a time that works for you. We'll run the numbers, compare what's available, and show you exactly what switching to variable could mean for your repayments and your goals.

Frequently Asked Questions