What Is a Fixed Rate Home Loan and How Does It Work?

Buying a home? One of the first big decisions you'll face is choosing the right type of loan. A fixed rate home loan is a popular option across Australia — and for good reason.

With a fixed rate loan, your interest rate stays the same for a set period, typically between 1 to 5 years. It’s a smart choice for first-home buyers, families, or anyone who wants predictable repayments and a stable budget.

Brisbane mortgage brokers at Kelly Brothers Finance can guide you through the fixed rate loan process — comparing lenders, explaining the fine print, and helping you avoid costly traps. They’ll save you time, reduce stress, and help align your loan with your financial goals.

Let’s take a closer look at what a fixed rate home loan is, how it works, its pros and cons, and how to apply for one in 2025.

What is a Fixed Rate Home Loan?

A fixed rate home loan means your interest rate stays the same for a set period — usually 1, 3, or 5 years — regardless of movements in the official cash rate. In contrast, a variable rate home loan changes with the market, meaning your repayments can go up or down over time. 

With a fixed rate, your repayment type remains consistent, offering cash-flow certainty and making it easier to budget confidently, even when interest rates shift.

How Does a Fixed Rate Home Loan Work? 

Banks and lenders set their fixed rate loans based on factors like the cash rate, borrowing costs, and market conditions.

Here’s how it typically works:

• You choose a fixed term (say 3 years).
  
  
• Your rate home loan interest is locked in.
  
  
• You pay the same loan repayments each month for that term.
  
  
• When the period ends, your loan reverts to a variable rate unless you refinance or re-fix.

In 2024, many lenders, like ANZ and Macquarie are offering fixed rates around 5.7%–6.1% for 2–3 years, according to RateCity.

Chat with Kelly Brothers Finance

Need help choosing the right fixed rate term? Talk to our Brisbane mortgage brokers today and get the right financial option suited for your situation. Call (07) 3847 9450 today or visit kellybrothersfinance.com.au for a free consultation.

Pros & Cons of Fixed Rate Home Loans

Fixed rate home loans offer plenty of advantages, but they’re not perfect for every situation. Understanding both sides can help you decide if it’s the right loan type for your needs.

✅ Pros of Fixed Rate Home Loans

• Repayment certainty – Your monthly repayments stay the same for the fixed period, making it easier to budget.
  
  
• Protection from rate rises – If interest rates go up, your fixed rate won’t change, keeping your costs stable.
  
  
• Peace of mind – Ideal for first-home buyers or families wanting financial predictability.
  
  
• Helps long-term planning – Fixed rates give you stability to plan ahead without worrying about market movements.
  
  

❌ Cons of Fixed Rate Home Loans

• Limited flexibility – Extra repayments are often capped, which can slow down your loan payoff.
  
  
• Break costs – Exiting or refinancing early during the fixed term can result in high fees.
  
  
• No benefit from rate drops – You won’t save if the market rate falls during your fixed period.
  
  
• Fewer features – Fixed loans may not include offset accounts or flexible redraw options.

How to Apply for a Fixed Rate Home Loan

Applying for a fixed rate home loan isn’t complicated, but getting it right can save you thousands. Working with a mortgage broker helps streamline the process and ensures the loan product you choose suits your financial circumstances.

Steps to Apply for a Fixed Rate Home Loan

1. Review your financial position

Start by assessing your borrowing power, income stability, expenses, and any outstanding debts like a credit card. This step helps determine what loan amounts, loan terms, and loan features might suit you best.

2. Speak with a mortgage broker

A broker compares loan interest rate options across lenders and finds a loan option tailored to your needs. They’ll help explain comparison rate, fees, and how fixed options stack up against variable rate loans or a split loan setup.

3. Choose your rate period and repayment structure

Decide the length of your fixed rate period (typically 1 to 5 years) and your preferred repayment type (weekly, fortnightly, or monthly). Consider if you’ll want to make additional payments or benefit from features like fee waivers and capped additional repayments.

4. Check eligibility criteria and lending criteria

Every lender has different eligibility criteria and lending criteria, so a broker will help match you with one that suits your profile. This includes checking your employment history, savings, deposit size, and any existing loan product such as a variable home loan.

5. Gather the required documents

You’ll need to supply proof of ID, income (such as payslips or tax returns), bank statements, and details of liabilities like loans or credit cards. Having everything ready speeds up your loan application and reduces delays.

6. Compare loan products and features

A broker will walk you through various fixed loan rates, loan features, and how they compare to variable interest rate options. You’ll also see how features like offset accounts, repayment fees, or fee waivers could affect your total cost.

7. Submit your loan application

Once you've selected your preferred lender and loan terms, your broker will submit your loan application for pre-approval. From there, the lender will assess your loan product based on your income, credit history, and other financial circumstances.

8. Await conditional approval and prepare for settlement

If approved, you’ll receive conditional approval outlining the loan interest rate, loan amounts, and conditions to meet. From there, your broker helps you liaise with the lender, solicitor, and even your nearest branch to finalise everything for settlement.

Tip: Don’t forget to discuss if you want the flexibility for additional repayments, or even consider a split loan to combine a fixed and variable rate loan — which might better suit your changing circumstances over the period of time you hold the loan.

Chat with Kelly Brothers Finance

Looking to lock in a great fixed rate home loan? Our experienced Brisbane mortgage brokers at Kelly Brothers Finance will guide you through every step, ensuring stability and savings for your future. Call us now at (07) 3847 9450 and get expert advice tailored to your goals.

Frequently Asked Questions (FAQs)

Is it a good idea to get a fixed-rate loan?

A fixed-rate loan can offer certainty of repayments and protect you from rising interest rates, especially helpful if you’re an owner occupier or buying an investment property. Use a loan comparison tool or speak with loan experts to weigh up the cost of borrowing, actual savings, and your personal circumstances.

What does home loan fixed rate mean?

A fixed rate means your interest stays the same for the agreed loan period, giving you predictable monthly payments. This can reduce financial stress compared to split rates or loans with a variable portion, especially if you're managing tight budgets or planning long-term.

What does 5% fixed interest rate mean?

It means your home loan interest will stay at 5% for the fixed loan term, regardless of what happens in the broader lending market. This is particularly useful for property investors looking to lock in the cost of borrowing and manage mortgage repayments with stability.

What happens when a fixed rate ends?

At the end of the loan journey, your loan will usually roll over to a variable portion unless you refinance, re-fix, or switch to a split home loan. It’s a good idea to review your loan balance, check your options using a mortgage calculator, and speak with a broker before loan settlement to maximise potential savings.

Can you make extra repayments on a fixed rate loan?

Yes, most eligible loans allow some extra payments, though limits may apply (e.g., $10,000 per year), and going over may trigger a break fee. Always review your loan contracts, and ask about any offset facility, ongoing home loan fees, or basic loan conditions.

How to choose the right fixed rate term?

Consider your credit criteria, life plans, and market trends when selecting a term — shorter terms offer flexibility, while longer ones offer certainty of repayments. Tools like a power calculator and professional advice from a broker can help match the best loan period with your needs at the time of application.

What do I need to apply for a fixed rate loan?

You’ll need to submit applications for credit, pass a credit check, and meet lender-specific credit subject requirements. Depending on the application fee, Lenders Mortgage Insurance, and other relevant terms, the approval process may vary for eligible home loans, investment property loans, or even a personal loan.

Final Thoughts

A fixed rate home loan can offer the peace of mind you need in 2025, especially when you want steady repayments and fewer surprises. Whether you're buying your first property or refinancing across Greater Brisbane or regional Queensland, we’ve got you covered. 

We're based in North Brisbane and offer a free consultation to help you find the right home loan for your goals. Talk to our expert mortgage brokers at Kelly Brothers Finance at (07) 3847 9450 — it’s your home and financial goals, and we’re here to help make it happen!