Fixing or Refixing Your Mortgage: 3 Questions to Ask Before You Lock In

Refixing your mortgage isn't glamorous. Nobody's posting about it on social media or celebrating at the pub afterwards. But it's one of the bigger financial decisions you make each year, and most people spend more time choosing a restaurant than they do thinking about their refix. A few good questions asked at the right time can save you thousands.

What Refixing Actually Means

First, a quick distinction. Refixing means locking in a new interest rate with your existing bank when your current fixed term expires. There are no application fees, no credit checks, and no paperwork beyond confirming your new rate and term. Refinancing is a different beast altogether - that's switching your mortgage to a different bank, which involves a full application, potentially a new valuation, and legal costs. Most people refix rather than refinance, so that's what we're focused on here.

You can typically lock in your new rate up to 60 days before your current term expires. Some banks offer rate guarantees, meaning if the rate drops between when you lock in and when your new term starts, they'll give you the lower rate automatically. It's worth asking your bank whether they offer this.

Where Are Rates Right Now

As of early 2025, fixed rates sit around 4.45% to 4.50% for popular terms, well down from the peaks we saw in 2024. The Reserve Bank has been cutting the Official Cash Rate (OCR) and forecasts suggest we're near the bottom of the cycle, with perhaps one more cut before rates stabilise through 2026. Floating rates remain considerably higher at 5.30% to 6.00%, which means fixing still makes sense for most borrowers.

The fact that six-month rates are currently about 45 basis points above one and two-year rates tells you something about market expectations. When short-term rates are higher than longer-term ones, the market is essentially saying it doesn't expect much further downside. That's a useful signal when you're deciding how long to fix for.

Question One: Where Do I Think Rates Are Heading

Nobody can predict interest rates with certainty, and anyone who tells you otherwise is selling something. But you can make a reasonable assessment based on what the Reserve Bank is signalling and what the swap rates are doing. If rates look like they've bottomed out - as they appear to have in early 2025 - then locking in a longer term gives you certainty at a good rate. If you genuinely believe there's more downside to come, a shorter term lets you refix sooner at what might be a lower rate, but you're taking a gamble.

The real question is how much certainty matters to you. Fixed rates give you predictable payments, protection if rates rise, and straightforward budgeting. Floating gives you the flexibility to make unlimited extra payments without restrictions and no break fees if you need to sell, but you pay a premium of 1% to 1.5% for that privilege. For most people, fixing some or all of the mortgage makes more sense than floating.

Question Two: How Does This Fit With My Other Loan Portions

If your mortgage is split across multiple accounts with different fixed terms - and it should be, in most cases - then your refix decision for one portion needs to consider the others. The whole point of splitting is to stagger your refix dates so you're not rolling everything over at once. If rates happen to be high when one portion comes off its fixed term, at least it's only affecting part of your mortgage rather than the whole lot.

Think about what terms your other portions are on and when they expire. If you've got a chunk coming off a two-year fix in six months, you might not want to also fix this portion for two years - you'd end up with everything resetting at roughly the same time again. Spread your risk by choosing different terms for different portions. A common approach is to fix the bulk of your mortgage at a two-year rate for stability, keep a smaller portion on a one-year or floating rate for flexibility, and adjust the mix each time a portion comes up for renewal.

Question Three: What's Happening in My Life Over the Next Year or Two

This is the question people most often forget to ask, and it's arguably the most important one. Your mortgage term needs to fit your life, not just the rate cycle. If you're thinking about selling within the next couple of years, fixing for a long term is risky because break fees on early exit can be substantial - potentially thousands of dollars. A shorter term or a floating portion gives you an exit without penalties.

If your income is likely to increase - a promotion, a partner returning to work - you'll want the ability to ramp up your repayments. Most fixed-term loans let you increase payments by up to 20% without penalty, which is a decent amount of headroom. But if you're expecting a big jump and want to throw everything at the mortgage, floating gives you unlimited flexibility. Similarly, if you're expecting a lump sum from a bonus, inheritance, or sale of another asset, try to time it before your refix so you can reduce the principal without incurring break fees.

Life changes like parental leave, a career shift, or starting a business all affect your ability to service your mortgage. If there's uncertainty ahead, shorter terms and more flexibility are worth paying slightly more for. If life is stable and predictable, lock in a good rate for longer and enjoy the certainty.

Putting It All Together

The right refix decision is personal. It depends on your rate outlook, your loan structure, and your life plans far more than it depends on picking the absolute lowest rate on the day. Most lenders let you increase repayments by 20% during fixed periods, which means you can still pay down your mortgage faster through compound interest savings even on a fixed rate. Use the refix as an opportunity to review your entire loan structure, not just the rate. And if you're unsure, talk to a mortgage adviser - a second opinion on a decision worth thousands of dollars is time well spent.