Don’t get stung by a high revert rate: Mozo research reveals fixed home loan trap
Fixed rate home loans can be an enticing option for borrowers. They provide security against rate hikes and certainty about fitting monthly repayments into the family budget. But some borrowers may be unprepared for the potentially high revert rates that await them at the end of their fixed term.
Fixed rate home loans usually come with a fixed term from one to five years long, or on some options, as long as seven or even ten years. While the rate is locked in for this period, it then reverts back to a variable rate option. These revert rates automatically kick in unless you negotiate an alternative with your lender, and they can make a huge difference to your monthly repayments.
If this is all news to you, you might be in for a shock. Research from Mozo has shed some light on just how steep revert rates can be for borrowers caught unaware.
High rates in store for borrowers
We compared 262 fixed rate loans for owner occupiers paying principal and interest and found that borrowers can generally expect to see sizeable rate increases once their fixed term rolls over to a variable revert rate. Here’s a breakdown of the average increases:
- For one year fixed rates you’ll be paying an average of 43 basis points more at the end of the period, with the average rate increasing from 4.02% p.a. to 4.45% p.a.
- For two year fixed rates you’ll be paying an average of 52 basis points more at the end of the period, with the average rate increasing from 3.93% p.a. to 4.45% p.a.
- For three year fixed rates you’ll be paying an average of 46 basis points more at the end of the period, with the average rate increasing from 3.99% p.a. to 4.45% p.a.
Even more concerning, in many cases, revert rates were at least 1% higher than the fixed rate offer. Of the fixed rate loans we compared:
- 40 of the one-year fixed rate loans reverted to a rate at least 1% higher
- 52 two-year fixed rate loans reverted to a rate at least 1% higher
- 40 three-year fixed rate loans reverted to a rate at least 1% higher
A 1% increase may not sound like much, but put in real terms, it can add up very quickly. For example, adding 1% to the interest rate on a $400,000 mortgage over 30 years, taking it from 4.00% to 5.00%, would add $247 to a borrower's’ monthly repayment. That’s nearly $3,000 extra paid in interest in one year.
Suncorp, Bank of Queensland, HSBC, RAMS and Arab Bank Australia were among the lenders with the biggest jumps, all increasing by more than 1.50% p.a.
On the other side of the coin, rates from lenders like AMP, Well Home Loans, Kogan Money, SCU and State Custodians actually dropped after a five year fixed period, some by as much as 1.10% p.a.
What steps should you take to avoid a nasty revert rate?
Sudden hikes can leave you struggling under the weight of your new repayments, so you’ll need to have a plan in place to avoid finding yourself in such a position. If you’re coming off a fixed rate mortgage and a high revert rate is on the horizon, there are a few things you can do.
The first is to get your bank or lender on the phone and see if you can arrive at a better deal. If you’re lucky, you might be able to lock in another fixed term or negotiate to have your loan switched over to an offer with a lower rate.
If that doesn’t prove fruitful, there’s always the option to refinance and find a better deal with a different lender. That’s why it pays to look at the other home loans that are available as your fixed rate term nears its end.
If refinancing looks like your best bet, be sure to check out the options available below.
Home loan comparisons on Mozo - last updated 19 March 2024
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Featured Product
Mozo experts choice awards won:
- Low Cost Home Loan - 2024
Unloan Variable
Owner Occupier, Refinance Only, LVR <80%
interest rate
comparison rate
Initial monthly repayment5.99% p.a. variable5.90% p.a.For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.
CompareCompareUnloan Variable
For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.
- interest rate
- 5.99% p.a. variable
- comparison rate
- 5.90% p.a.
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $10,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Unloan Unloan Variable
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Offset Home Loan
Package, Owner Occupier, LVR<60%, Principal & Interest
interest rate
comparison rate
Initial monthly repayment6.15% p.a. variable6.40% p.a.Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.
CompareCompareOffset Home Loan
Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.
- interest rate
- 6.15% p.a. variable
- comparison rate
- 6.40% p.a.
- Ongoing fees
- $248.00 yearly
- Discharge Fee
- $400.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Macquarie Offset Home Loan
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Neat Home Loan
Owner Occupier, Principal & Interest, LVR <60%
interest rate
comparison rate
Initial monthly repayment6.14% p.a. variable6.16% p.a.Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.
CompareCompareNeat Home Loan
Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.
- interest rate
- 6.14% p.a. variable
- comparison rate
- 6.16% p.a.
- Ongoing fees
- $0.00
- Discharge Fee
- $300.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $80,000
- maximum borrowing amount
- $5,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the ubank Neat Home Loan
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Straight Up
Obliterate, Owner Occupier, Principal & Interest, <50% LVR
interest rate
comparison rate
Initial monthly repayment6.24% p.a. variable6.24% p.a.Get a low variable rate depending on your deposit with Athena’s Straight Up Variable Home Loan. AcceleRATES feature helps you to reduce your home loan even faster (T&Cs apply). Zero fees to pay. Free redraw facility. Handy mobile app to manage your home loan.
CompareCompareStraight Up
Get a low variable rate depending on your deposit with Athena’s Straight Up Variable Home Loan. AcceleRATES feature helps you to reduce your home loan even faster (T&Cs apply). Zero fees to pay. Free redraw facility. Handy mobile app to manage your home loan.
- interest rate
- 6.24% p.a. variable
- comparison rate
- 6.24% p.a.
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 50.00%
- minimum borrowing amount
- $100,000
- maximum borrowing amount
- $2,500,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Athena Straight Up
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Flex Home Loan
Fixed, Owner Occupier, Principal & Interest, LVR <60%
interest rate
comparison rate
Initial monthly repayment5.99% p.a.
fixed 3 years6.37% p.a.Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.
CompareCompareFlex Home Loan
Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.
- interest rate
- 5.99% p.a.
fixed 3 years
- comparison rate
- 6.37% p.a.
- Ongoing fees
- $250.00 yearly
- Discharge Fee
- $300.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- -
- maximum borrowing amount
- -
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the ubank Flex Home Loan
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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
^See information about the Mozo Experts Choice Home Loan Awards
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