Switching From Fixed to Variable (or Variable to Fixed) – When Refinancing Makes Sense

Switching From Fixed to Variable (or Variable to Fixed) – When Refinancing Makes Sense

Interest rates move, your lifestyle changes and your financial goals evolve. That’s why many homeowners reach a point where their current loan structure no longer fits. Refinancing gives you the opportunity to switch between fixed and variable rates — or blend the two — at the right time.

This guide breaks down when switching makes sense and how to choose the right structure for your situation.

1️⃣ Why Homeowners Switch Between Fixed and Variable

You may outgrow your current structure for reasons like:

• Rate rises or drops.
• Needing more repayment flexibility.
• Wanting predictable budgeting.
• Upcoming lifestyle changes (parental leave, retirement, business plans).
• Using loan features like offset that fixed loans often restrict.

Refinancing lets you realign your loan with where your life is heading.

2️⃣ Switching From Fixed to Variable – When It’s a Good Move

You might switch from fixed to variable when:

• Your fixed rate is ending soon.
• You want access to an offset account.
• You want the ability to make extra repayments.
• You expect rates to drop.
• Your bank’s revert rate is too high.

Variable loans offer more control and flexibility — perfect for changing circumstances.

3️⃣ Switching From Variable to Fixed – When It Makes Sense

Fixing can be a strategic decision when:

• You want predictable repayments.
• You’re preparing for tighter cash flow.
• You expect rates to rise.
• You’re budgeting for major life changes.
• You’re feeling stressed about rate fluctuations.

Fixing brings stability and peace of mind, especially for families.

4️⃣ Should You Split the Loan?

A split loan combines both fixed and variable benefits.
It’s useful when you want:

• Stability on part of your loan.
• Flexibility to make extra repayments.
• Access to an offset account on the variable portion.

Splits are becoming more popular because they balance certainty and flexibility.

5️⃣ What to Consider Before Switching

Before refinancing into a new structure, check:

• Your goals: Cash flow? Certainty? Flexibility?
• Exit fees: Any break costs if still in a fixed period?
• Future plans: Upgrading, renovating or downsizing?
• Current market trends: Rate cycles matter.
• Loan features: Offset, redraw, extra repayments.

The right choice depends on what you value most.

6️⃣ Break Costs – The Most Important Factor

If you’re still in a fixed rate, breaking early may trigger a break cost.
Break costs depend on:

• How long is left on the fixed term.
• Your fixed rate vs current market rates.
• How your lender calculates economic cost.

Sometimes break costs are tiny — sometimes they’re large.
Always check before switching.

7️⃣ Timing Your Switch With the Market

A good time to review switching is when:

• Your fixed rate expires in the next 6 months.
• Rates are trending down or stabilising.
• You need flexibility for upcoming plans.
• Your variable rate has jumped too high.

The “right” time depends more on your goals than on predicting markets.

8️⃣ What Lenders Review When You Refinance

A refinance is a fresh application, so lenders consider:

• Your income and employment stability.
• Your living expenses.
• Your equity position.
• Your credit history.
• Your desired loan structure.

Most homeowners can refinance into a new structure without any issues.

9️⃣ Common Mistakes Homeowners Make When Switching

Avoid:

• Locking in for too long without flexibility.
• Switching based only on cashbacks.
• Breaking a fixed rate without checking costs first.
• Fixing 100% when you need access to offset funds.
• Assuming your current bank offers the best fixed rates.

A smart switch always starts with a comparison.

🔟 The Smartest Way to Switch Between Fixed & Variable

A broker can help you:

• Compare current fixed and variable offers.
• Check break costs and timing.
• Structure a split loan if needed.
• Align your loan with your future plans.