A fixed rate home loan locks your interest rate for a set period, usually between one and five years.
For teaching assistants working on term contracts or part-time schedules, knowing exactly what your repayments will be can make budgeting more predictable. You choose the rate lock period when you apply, and your repayments stay the same regardless of what happens to the Reserve Bank cash rate or what lenders do with their variable products.
The trade-off is less flexibility. Most fixed rate products restrict extra repayments to around $10,000 to $30,000 per year, and you can't redraw funds you've paid ahead. If you want to refinance or sell before the fixed term ends, you'll likely face break costs.
How fixed rate periods work
You select a fixed period when you lodge your home loan application. Most lenders offer terms of one, two, three, four, or five years. Once the fixed period expires, your loan automatically converts to the lender's standard variable rate unless you contact them to arrange a new fixed term or refinance elsewhere.
The standard variable rate is usually higher than both the advertised fixed rates and the discounted variable rates offered to new borrowers. If you do nothing, your repayments can jump significantly. In our experience, borrowers who forget their fixed term is ending often see repayment increases of $200 to $400 per month when they revert to standard variable.
We send reminders to clients around three months before their fixed period ends so they can decide whether to refix, switch to variable, or refinance. That window gives you time to compare rates and lock in a new deal before the old one expires.
Break costs and when they apply
Break costs are a charge the lender imposes if you exit a fixed rate loan before the term ends. The calculation is based on the difference between the rate you locked in and the rate the lender can now earn by lending that money elsewhere, multiplied by the remaining loan term.
If rates have risen since you fixed, break costs are usually zero or very low because the lender can re-lend your funds at a higher rate. If rates have fallen, break costs can run into thousands of dollars.
Consider a teaching assistant who fixed $400,000 at 5.5% for three years. After 18 months, they decide to sell and upgrade. If the current fixed rate for the remaining 18 months is 4.8%, the lender has lost the ability to earn that higher rate on the remaining balance. The break cost formula will reflect that lost income, often coming in around $8,000 to $12,000 depending on the exact calculation method and remaining loan balance.
You can request a break cost estimate from your lender at any time. If you're thinking about selling or refinancing mid-term, get that figure in writing before you commit to anything.
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Split loans as a middle option
A split loan divides your borrowing between fixed and variable portions. You might fix 50% or 60% of the loan and leave the rest variable. This gives you repayment certainty on part of the loan while keeping the flexibility to make extra repayments or redraw against the variable portion.
Most lenders let you split a loan into two or three portions without charging extra fees. Each portion has its own rate, repayment amount, and terms. The fixed portion behaves like a standalone fixed loan, and the variable portion works like a standard variable product with full offset and redraw access.
In a scenario where a teaching assistant borrows for an owner occupied home loan, they might fix $300,000 at a set rate for three years and keep $150,000 variable. If they receive casual relief shifts or holiday program pay that fluctuates, they can direct that extra income into an offset account linked to the variable portion, reducing interest without triggering break costs or losing access to the funds.
The downside is managing two sets of terms and two expiry dates if you split into multiple fixed periods. You need to remember when each portion reverts and what your options are at that point.
What to watch for in fixed rate products
Some lenders restrict portability on fixed rate loans. Portability lets you transfer your existing loan to a new property without breaking the fixed term. If your lender doesn't allow this, selling your home mid-term means you'll pay break costs even if you're buying another property and staying with the same lender.
Other features to check include whether the fixed rate comes with an offset account. Many fixed products don't, which means any spare cash you hold in savings won't reduce your interest. If you rely on offset access to manage irregular income, a fixed loan without offset can cost you more over time than the rate benefit delivers.
Also confirm the annual extra repayment limit. Some lenders cap this at $10,000, others at $30,000. If you're expecting a payout, inheritance, or other lump sum during the fixed period, you need to know whether you can apply it to the loan or whether it will sit in a savings account earning less than you're paying in interest.
When fixing makes sense for teaching assistants
Fixed rates suit teaching assistants who value repayment certainty over flexibility. If your income is stable and you're confident you won't need to access extra funds or refinance in the short term, locking in a rate protects you from rate rises and makes household budgeting straightforward.
Fixing also makes sense if you expect rates to increase. If you believe the Reserve Bank will lift the cash rate over the next couple of years, a fixed loan locks in today's rate and shields you from those increases during the fixed period.
On the other hand, if you're planning to sell, upgrade, or receive a windfall that you'll want to pay down against the loan, a variable product or split loan will give you more room to move. Teaching assistants on casual or contract roles who might move interstate or change schools should weigh the risk of break costs against the benefit of fixed repayments.
Before you commit, run the numbers on what your repayments will be during the fixed period, what happens when it expires, and what it would cost to exit early. Those three scenarios will tell you whether a fixed rate suits your circumstances or whether you'd be locked into something that limits your options without enough upside to justify it.
Frequently Asked Questions
What happens when my fixed rate period ends?
Your loan automatically converts to the lender's standard variable rate, which is usually higher than advertised rates. You can avoid this by contacting your lender three months before expiry to arrange a new fixed term or refinance to a better rate.
Can I make extra repayments on a fixed rate home loan?
Most fixed rate loans allow extra repayments between $10,000 and $30,000 per year. Any amount above that limit may trigger break costs or be refused by the lender.
How are break costs calculated on a fixed rate loan?
Break costs are based on the difference between your locked rate and the current rate the lender can earn, multiplied by the remaining term. If rates have risen since you fixed, break costs are usually zero or very low.
What is a split loan and how does it work?
A split loan divides your borrowing between fixed and variable portions. You get repayment certainty on the fixed part while keeping the flexibility to make extra repayments or use an offset account on the variable part.
Should teaching assistants choose a fixed or variable home loan?
Fixed rates suit teaching assistants who value repayment certainty and don't expect to sell or refinance soon. Variable or split loans work better if you need flexibility for extra repayments or might move within a few years.
