If you're currently on a variable rate and watching the market fluctuate, switching to a fixed rate through refinancing might feel like a sensible move.
The decision comes down to whether locking in certainty is worth giving up the flexibility and potential savings that come with a variable loan. Your current repayment amount, how long you plan to stay in the property, and what's happening with rate expectations all play a role. If you're refinancing anyway to access a lower rate or consolidate debt, the choice between variable and fixed becomes part of a larger conversation about what your loan needs to do for you right now.
What You Gain by Switching to a Fixed Rate
Locking in a fixed rate gives you repayment certainty for the duration of the fixed period, typically between one and five years. Your repayments stay the same regardless of what happens with the Reserve Bank or lender rate movements. For households managing tight budgets or those who prefer to know exactly what's going out each month, that predictability can make financial planning much more straightforward.
Consider a household in Labrador with a loan amount of around $450,000. If they're currently on a variable rate and concerned about further rate rises, fixing for three years means they can budget with confidence. They'll know their exact mortgage cost for that period, which helps when planning other expenses like school fees, vehicle upgrades, or investment property deposits. The downside is that if rates drop during that fixed period, they won't benefit unless they're willing to pay break costs to exit early.
What You Give Up When You Lock In
Fixed rate loans typically don't offer the same features as variable loans. Most lenders limit or remove access to offset accounts and redraw facilities on fixed products, and they cap extra repayments at around $10,000 to $20,000 per year depending on the lender. If you're someone who regularly makes lump sum payments or relies on an offset account to reduce interest, switching to fixed means losing those tools.
You're also committing to that rate for the fixed term. If you need to exit the loan early because you're selling the property, upgrading, or refinancing again, break costs can apply. These are calculated based on the difference between your fixed rate and the current wholesale rate, and they can run into thousands of dollars depending on how much time is left on the fixed period.
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The Split Rate Option Worth Considering
You don't have to choose one or the other. Splitting your loan between fixed and variable rates lets you lock in certainty on part of the loan while keeping flexibility on the rest. A common approach is to fix 50% to 70% of the loan amount and leave the remainder on variable.
This structure gives you stable repayments on the fixed portion while still allowing extra repayments, offset account access, and potential rate reductions on the variable portion. If you're refinancing to consolidate debt into your mortgage or access equity, a split can give you the security of knowing your core repayment is stable while keeping the flexibility to pay down the variable portion faster if your cashflow improves. In our experience, this setup works well for Labrador residents who want some protection against rate rises but don't want to lose the ability to make extra repayments when bonuses or other income comes through.
How Refinancing to Fixed Works in Practice
The refinance process to switch from variable to fixed follows the same steps as any other refinance. You'll need to provide income verification, undergo a property valuation, and meet the lender's serviceability requirements. The key difference is that you'll be choosing your fixed rate term and understanding what features you're prepared to give up in exchange for rate certainty.
Most lenders will allow you to lock in the fixed rate once the loan is approved but before settlement, which protects you if rates rise between approval and when the loan actually funds. The entire refinance application typically takes two to four weeks depending on how quickly you can provide documents and how long the valuation takes. If your property is in an area like Labrador where valuations are straightforward due to consistent sales data, the process tends to move quickly.
When Switching to Fixed Makes Sense for Labrador Borrowers
If you're already planning to refinance for another reason, such as coming off a fixed rate period that's ending or accessing equity to fund renovations or an investment property, the variable versus fixed question becomes part of that broader decision. Labrador's waterfront properties and proximity to the Broadwater make it a stable market for valuations, which means refinancing here is typically more predictable than in areas with less sales activity.
Switching to fixed works well when you value certainty over flexibility, when you're not planning to make large extra repayments, and when you're confident you won't need to sell or refinance again during the fixed term. If any of those conditions don't apply, a variable loan or a split structure might serve you in a different way. A loan health check can help clarify whether your current loan structure still matches your financial situation, especially if it's been a few years since you last reviewed your mortgage.
Fixed Rate Expiry and Your Next Move
If you're currently on a fixed rate that's about to expire, you'll automatically revert to your lender's standard variable rate unless you take action. That reversion rate is almost always higher than what you could access by refinancing or renegotiating. This is the ideal time to consider whether you want to fix again, switch to variable, or move to a different lender entirely.
Many Labrador households we work with use fixed rate expiry as a trigger to review their entire loan structure. It's a natural point to assess whether your loan amount has reduced enough to access different rate tiers, whether your property has increased in value enough to remove lender's mortgage insurance on a new loan, or whether your financial situation has changed in a way that opens up different loan options. Refinancing at this point isn't just about the rate, it's about making sure your loan still fits what you're trying to achieve.
If you're weighing up whether to lock in a fixed rate or stay variable, call one of our team or book an appointment at a time that works for you. We'll run through your current loan, what's available in the market right now, and whether refinancing makes sense for your situation in Labrador.
Frequently Asked Questions
What do I lose when I switch from variable to fixed rate?
Most fixed rate loans limit or remove access to offset accounts and redraw facilities, and they cap extra repayments at around $10,000 to $20,000 per year. You also can't benefit from rate drops during the fixed period without paying break costs to exit early.
Can I split my loan between fixed and variable rates?
Yes, splitting your loan lets you lock in certainty on part of the loan while keeping flexibility on the rest. A common approach is to fix 50% to 70% of the loan and leave the remainder variable, giving you stable repayments and the ability to make extra payments on the variable portion.
How long does it take to refinance from variable to fixed?
The refinance process typically takes two to four weeks depending on how quickly you provide documents and how long the property valuation takes. Most lenders let you lock in the fixed rate once approved but before settlement.
What happens when my fixed rate period ends?
You'll automatically revert to your lender's standard variable rate unless you take action. This reversion rate is almost always higher than what you could access by refinancing or renegotiating, making it an ideal time to review your loan structure.
When does switching to fixed make sense?
Switching to fixed makes sense when you value repayment certainty over flexibility, when you're not planning to make large extra repayments, and when you're confident you won't need to sell or refinance during the fixed term. If those conditions don't apply, variable or a split structure might suit you in a different way.
