How long can I lock in Australia's lowest rates for?

When it comes to taking out a home loan, many Australians will seek out the lowest interest rate they can find. Many mortgages are offered at a fixed rate for a particular term. However, these rates are subject to change up until the loan settlement. Some lenders allow borrowers to “lock in” these fixed rates for a select period, often charging a fee for the privilege.

The ability to lock in low fixed interest rates may offer borrowers protection against rate rises and provide more time to compare the market and secure the most favourable home loan.

How does a rate lock work?

Buyers making a fixed rate mortgage application can apply to their lender to lock in the advertised interest rate for a set period. This means that even if the lender raises rates on the home loan you’ve applied for prior to loan settlement, your fixed rate won’t change.

How long can you lock in fixed rates?

A rate lock typically lasts for 90 days from the time that a signed form is received by the lender. You should check with each specific lender to find out their rate lock terms, as some banks have different rules.

If your loan funding is delayed or settlement is extended, you may be able to request that your lender extend the rate lock but you’ll often be charged an extra fee to do so. If your rate lock expires prior to loan settlement you’ll be charged the reference rate that’s applicable on the day.

How much is the rate lock fee?

This fee differs depending on the lender. For some context, let’s examine how the Big Four charge rate locks:

How to request a rate lock

The process for securing a rate lock may differ lender to lender but there are general steps you can follow:

• Check with your preferred lender that your application is eligible for a rate lock.
• You’ll need to sign a rate lock form and nominate a bank account to pay the fee.
• Your lender will lock in your reference rate once they receive your form.
• The rate lock fee will be charged once your home loan account is established.
• The fixed rate will be locked in for a set period (typically 90 days).
• Finalise your mortgage application with your lender and enjoy your fixed interest rate.

Is a rate lock worthwhile?

Locking in a fixed rate can be advantageous, particularly during a period of rising interest rates. This action may provide you with the necessary time to consider alternate home loan options, without the fear of losing the low rate you’ve discovered.

It’s important to note that rate lock fees aren't usually refundable. Additionally, if the advertised interest rate on the mortgage you’ve nominated for a rate lock goes down, you won’t automatically receive the lower rate. Most banks will still charge the initial fee but allow you to break the rate lock and opt for the reduced rate.

If you want to change the loan you’ve applied for - i.e. the loan amount, loan term or fixed rate period - and lock in a new interest rate, you’ll likely have to pay for another rate lock in addition to the original fee.

Generally, rate lock fees can only be refunded if an application is declined or there’s a bank error.

It may be worthwhile discussing whether or not to carry out a rate lock on particular home loan products with a mortgage broker or home loan specialist. These professionals may be able to provide insights and advice specific to your financial needs or goals. 

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