A fixed rate means your repayments stay the same for an agreed term, usually between one and five years. For criminal lawyers buying their first home, the Australian Government 5% Deposit Scheme allows you to purchase with a 5% deposit, and you can pair that low deposit with a fixed rate to stabilise your cash flow during the first years of ownership.
The decision to fix is not just about predicting rates. It is about knowing which features you can and cannot access during the fixed term, and whether those restrictions matter for your situation.
The Rate Lock Period: What It Covers and What It Costs
A rate lock allows you to secure an advertised fixed rate before settlement, usually for 90 days from approval. If rates rise during that period, you are protected. If rates fall, you pay the higher locked rate unless your lender allows a relock, which is not standard.
Consider a solicitor who locks a rate in early July for a September settlement. If the lender increases fixed rates by 0.30% in August, the buyer avoids that rise. If rates drop by 0.20%, the original rate applies unless the loan has not yet been formally lodged and the lender agrees to resubmit. Some lenders charge a fee to extend a rate lock beyond 90 days. Others will not extend at all and require you to reapply at current rates.
Rate locks are binding once the loan is formally approved and the contract is unconditional. You cannot walk away without potential break costs if you decide to refinance or cancel after the lock period starts.
Offset Accounts on Fixed Loans: When They Are Available and When They Are Not
Most fixed rate products do not include a full offset account. Some lenders offer a partial offset, usually capped at 20% to 40% of the loan balance, during a fixed term. Others offer no offset at all.
A full offset account sits alongside your loan and reduces the interest charged on the outstanding balance. If your loan is $600,000 and you hold $50,000 in a linked offset, you pay interest on $550,000. That reduction applies daily. On a variable loan, this feature is standard. On a fixed loan, it is rare.
If you are a criminal lawyer expecting irregular income from briefs or settlements, an offset account allows you to park funds and reduce interest without committing them to extra repayments. Without an offset, those funds sit in a separate savings account earning taxable interest while your loan accrues interest on the full balance.
If cash flow consistency matters more than flexibility, a fixed rate without offset may still suit. If you expect to accumulate surplus funds during the fixed term, confirm whether the lender offers at least a partial offset before you lock the rate.
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Redraw Facilities: How They Differ from Offsets and Why Lenders Restrict Them
A redraw facility lets you access extra repayments you have made above the minimum. Unlike an offset, the funds are not held in a separate account. They are paid into the loan and reduce the principal. You apply to withdraw them later if needed.
On a variable loan, redraw is usually unrestricted. On a fixed loan, most lenders limit redraw or do not allow it at all. Some permit one withdrawal per year. Others set a minimum redraw amount, often $5,000 or more. A few lenders allow unrestricted redraw during the fixed term, but the interest rate is often higher to compensate.
The distinction matters when you plan to make extra repayments but want the option to access those funds. If you pay an additional $20,000 into your loan during the first two years and then need that amount for a vehicle or urgent expense, a restricted redraw means you cannot access it without refinancing or waiting until the fixed term ends.
If you value liquidity, an offset account is preferable. If you want to reduce principal and are confident you will not need those funds, redraw with restrictions may be acceptable.
Break Costs: How They Are Calculated and When They Apply
Break costs apply when you exit a fixed rate loan early. This includes refinancing, selling the property, or making a lump sum repayment above the permitted annual limit, which is usually capped at $10,000 to $30,000 depending on the lender.
The calculation compares the fixed rate you are paying to the wholesale rate the lender can now earn by lending those funds for the remaining fixed term. If rates have fallen since you fixed, the lender loses income and charges you the difference. If rates have risen, the break cost is nil because the lender can relend at a higher rate.
As an example, a criminal lawyer fixes $500,000 at 5.89% for three years. Two years later, the equivalent wholesale rate is 4.20%. The lender calculates the lost income over the remaining 12 months and charges that amount as a break cost, often several thousand dollars. If the wholesale rate is 6.10%, no break cost applies.
Break costs are not transparent until you request a payout figure. Lenders do not publish the formula in plain language, and the final figure can vary depending on how the lender sources its funding. If you think you may sell, refinance, or make large lump sum payments during the fixed term, a variable loan or a shorter fixed term reduces exposure to break costs.
Split Loans: When Combining Fixed and Variable Rates Makes Sense
A split loan divides your borrowing into two or more portions, each with different features. A common structure is 50% fixed and 50% variable. The fixed portion provides repayment certainty. The variable portion allows access to offset and redraw without restriction.
For a first home buyer using the Australian Government 5% Deposit Scheme, which is administered through a panel of 31 lenders, not all participating lenders offer split loans. The major banks do. Many of the non-major lenders do not, or they limit the minimum split portion to 25% or $150,000, which may be too high for a smaller loan.
A split structure suits buyers who want some repayment stability but also expect to hold surplus cash or make additional repayments during the loan term. The variable portion can be offset in full, and lump sum payments can be made without restriction. The fixed portion provides a floor for budgeting.
The downside is that you pay two sets of fees: application fees, valuation fees, and ongoing account fees may apply to each split portion. Some lenders waive duplicate fees. Others do not. Confirm the total cost before committing.
Refinancing After the Fixed Term: What to Prepare For
When the fixed term ends, your loan reverts to the lender's standard variable rate unless you negotiate a new rate or refinance. Reversion rates are often higher than discounted variable rates offered to new customers, sometimes by 0.50% to 1.00% or more.
If you refinance at that point, you will need a current valuation, updated income documentation, and a clear credit file. For criminal lawyers, income can fluctuate depending on case load and billing cycles. Lenders assess your capacity using recent payslips or tax returns. If your income has dropped or your expenses have increased, you may not qualify for the same loan size or rate discount.
Prepare by reviewing your loan at least six months before the fixed term expires. Request a rate review from your current lender or approach a broker to compare refinancing options. If you have built equity and your income is stable, refinancing may deliver a lower rate and access to features you did not have during the fixed term.
If you stay with your current lender, negotiate before the reversion date. Lenders retain customers by matching or beating external offers, but only if you ask.
How Fixed Rates Interact with Government Schemes and Stamp Duty Concessions
Fixed rates do not affect your eligibility for first home buyer concessions or the 5% Deposit Scheme. You can combine a fixed rate with stamp duty concessions in your state or territory and access government grants where applicable.
In New South Wales, first home buyers receive full stamp duty exemption on properties up to $800,000 and a sliding concession up to $1,000,000. In Victoria, full exemption applies to properties up to $600,000, with a concession phase-out at $750,000. These concessions apply regardless of whether you choose a fixed or variable rate.
The 5% Deposit Scheme allows you to avoid lenders mortgage insurance, which would otherwise add several thousand dollars to your upfront costs. You can fix the full loan amount, split it, or keep it variable. The scheme does not restrict your choice of interest rate structure.
If you are using the scheme, confirm that your chosen lender supports the features you need. Not all participating lenders offer split loans, partial offsets, or unrestricted redraw during a fixed term. Check the lender's product disclosure statement before lodging your application.
Call one of our team or book an appointment at a time that works for you. We work with criminal lawyers who are buying their first home and can clarify which lenders within the 5% Deposit Scheme panel support the features that matter for your situation.
Frequently Asked Questions
Can I have an offset account with a fixed rate home loan?
Most fixed rate loans do not include a full offset account. Some lenders offer a partial offset, usually capped at 20% to 40% of the loan balance. If you expect to hold surplus funds during the fixed term, confirm offset availability before locking your rate.
What are break costs and when do they apply?
Break costs apply when you exit a fixed rate loan early by refinancing, selling, or making extra repayments above the annual limit. The lender calculates the cost based on the difference between your fixed rate and current wholesale rates. If rates have fallen, break costs can be significant.
How long does a rate lock last on a fixed rate loan?
A rate lock typically lasts 90 days from approval to settlement. If your settlement is delayed, some lenders charge a fee to extend the lock, while others require you to reapply at current rates.
Can I use the 5% Deposit Scheme with a fixed rate loan?
Yes. The Australian Government 5% Deposit Scheme allows you to purchase with a 5% deposit and does not restrict your choice of fixed or variable rates. You can fix the full loan, split it, or keep it variable depending on your lender and product.
What happens to my loan when the fixed term ends?
When the fixed term ends, your loan reverts to the lender's standard variable rate, which is often higher than discounted rates for new customers. You can negotiate a new rate with your current lender or refinance to access a lower rate and additional features.
