Proven Tips to Lock Fixed Rates on Investment Loans

Fixed rate investment loans let you lock in a known interest cost for a set period while rental income continues to flow.

That certainty matters when you are holding property for income and building equity over time, particularly in a market where regulatory settings and tax rules are shifting. Knowing your repayment for the next two, three or five years means you can model cash flow with confidence and plan your next move without watching rate announcements every month.

Fixed Rate Terms and Break Cost Calculations

A fixed rate term on an investment loan runs from one to five years, with three-year terms the most common choice among investors. The rate is locked at the point you settle, which means you are protected from rate rises but cannot take advantage of cuts during the fixed period.

Break costs apply if you repay the loan, refinance or pay more than the permitted annual extra repayment amount before the term ends. Lenders calculate the break cost by comparing the rate you locked in with the wholesale rate they can achieve by lending that money elsewhere for the remainder of your fixed term. If rates have fallen since you locked in, the break cost can run to several thousand dollars.

Consider an investor who fixed a $450,000 loan at the start of a three-year term and needs to refinance 18 months later to access equity for a second purchase. If rates have dropped by half a percentage point in that period, the lender will charge the difference between what they expected to earn from you and what they can now earn on the wholesale market, multiplied by the remaining 18 months. The calculation depends on the lender's funding arrangements, but a $6,000 to $9,000 break cost is not unusual in that scenario.

Some lenders allow you to make up to $10,000 or $20,000 in extra repayments each year during a fixed term without penalty. Others offer partial offset accounts against fixed rate debt, though the interest saved is usually lower than the full offset benefit you would see on a variable loan.

Interest Only Repayments During a Fixed Period

Interest only repayments are available on fixed rate investment loans, typically for terms of one to five years. The interest only period and the fixed rate term do not have to align, but most investors match them to keep the loan structure clear.

When you are paying interest only, your repayment is calculated as the loan balance multiplied by the interest rate divided by twelve. Because the balance does not reduce, the repayment amount stays the same each month during the fixed term. That consistency makes it straightforward to forecast cash flow and assess whether the property is generating positive or negative cash flow after rental income.

An investor holding a unit in Fremantle with a $380,000 loan on a three-year fixed rate at interest only will pay the same amount each month for 36 months, regardless of movements in the broader market. The rental income from the property covers part of that repayment, and the investor claims the full interest amount as a deduction. At the end of the interest only period, the loan typically reverts to principal and interest unless you negotiate a new interest only term, which may require updated serviceability assessment and renewed documentation.

From 1 July 2027, net rental losses on residential dwellings acquired after 7:30pm AEST on 12 May 2026 will be quarantined and can only be offset against other residential rental income or carried forward, unless the property qualifies as an eligible new build. Properties held before that date remain unaffected, and the interest deduction itself is unchanged. The shift affects how you use the loss, not the ability to claim the interest.

Rate Discount Structures and Loan to Value Ratio

Investor interest rates are priced higher than owner-occupier rates, and the discount you receive depends on your loan to value ratio, the property location, and the lender's appetite for investment lending at the time you apply.

A lower LVR typically attracts a larger rate discount. Borrowing at 70 per cent LVR will usually secure a better rate than borrowing at 90 per cent, because the lender's risk is lower. Some lenders also differentiate between metro and regional postcodes, and a handful apply different pricing for units versus houses, particularly in oversupplied apartment markets.

In Western Australia, investors purchasing in established suburbs such as Mount Lawley, Subiaco or Cottesloe will generally see competitive pricing across most lenders. Properties in smaller regional centres or postcodes with high vacancy rates may be subject to additional loading or reduced LVR caps, depending on the lender's credit policy.

If you are refinancing an investment loan, the same LVR pricing applies. Lenders assess the current property value, not the purchase price, so if your property has increased in value since you bought it, your LVR will have improved and you may qualify for a lower rate than you are currently paying.

Split Rate Structures and Portfolio Flexibility

A split rate loan divides your total borrowing into two or more portions, with one part on a fixed rate and the other on a variable rate. The split can be any proportion you choose, such as 50/50, 70/30 or 80/20, and you can adjust the split when you refinance or when your fixed term ends.

The variable portion gives you access to features such as offset accounts and unlimited extra repayments, which are usually restricted or unavailable on the fixed portion. The fixed portion provides rate certainty for the term you select. Investors use splits to hedge interest rate risk while maintaining the flexibility to make lump sum repayments from surplus rental income or other sources without incurring break costs.

Consider an investor who borrows $500,000 to purchase a property in Joondalup and splits the loan into $300,000 fixed for three years and $200,000 variable with a linked offset account. Rental income and any surplus cash sit in the offset account, reducing the interest charged on the variable portion. The fixed portion delivers a known repayment that cannot increase, even if the Reserve Bank lifts rates during the term. At the end of three years, the investor can re-fix the $300,000, move it to variable, or adjust the split based on the rate outlook at that time.

Splits also allow you to stagger fixed rate expiry dates if you hold multiple properties. You might fix one property on a two-year term, another on three years, and leave a third on variable, so that you are not forced to refinance your entire portfolio at the same time if rates are unfavourable when a fixed term ends.

Refinancing Before Fixed Rate Expiry

Most lenders allow you to refinance or switch products within 90 days of your fixed rate expiry without incurring break costs. Some extend that window to six months. If you need to move earlier, break costs will apply unless the lender offers an internal product switch with a waiver.

Investors refinancing to access equity for further purchases often time the move to align with fixed rate expiry, because pulling equity out mid-term on a fixed loan will trigger break costs. If you need funds before expiry, you can apply for a separate top-up or line of credit secured against the property without disturbing the existing fixed rate loan, though serviceability and LVR limits will apply to the additional borrowing.

Refinancing from a fixed rate to a variable rate, or to a new fixed term with a different lender, requires a full application and valuation. The new lender will assess your current income, existing debt, and the rental income from the property. APRA's serviceability buffer of 3 percentage points above the product rate applies, and the debt-to-income cap of 6 times gross income applies to up to 20 per cent of new investor loans, so if you have increased your debt level since the original loan was written, you may face tighter lending conditions.

Rate Lock and Settlement Timing

When you apply for a fixed rate investment loan, the lender will offer you a rate lock period, typically 90 days from the date the rate is confirmed. If settlement occurs within that window, you receive the locked rate. If settlement is delayed beyond the lock period, the rate reverts to the prevailing fixed rate at the time of settlement, which may be higher or lower than the original lock.

Rate locks do not usually incur a fee, but they are a one-time offer. If you choose not to proceed with the loan, you cannot transfer the locked rate to a different property or re-lock at the same rate with the same lender unless they agree to reissue the lock.

Investors purchasing off-the-plan or building new dwellings need to be particularly careful with rate lock periods, because construction delays can push settlement well beyond 90 days. Some lenders offer extended lock periods for new builds, while others require you to reapply closer to the anticipated settlement date. If you locked a rate 12 months ago and the project is only now completing, the original rate will not apply.

From a tax perspective, eligible new builds acquired after 7:30pm AEST on 12 May 2026 retain access to negative gearing and offer an election between the 50 per cent CGT discount and cost base indexation with a 30 per cent minimum tax rate on gains accruing after 1 July 2027. That makes the timing of settlement relevant not only for the interest rate you secure but also for the tax treatment of the property over the life of your investment.

Fixed rate investment loans are a tool for managing interest rate risk and cash flow certainty, and they work when the structure matches your investment strategy and the term aligns with your plans for the property. Break costs, LVR pricing, split loan flexibility, and refinancing timing all affect the outcome, and each of those variables can be shaped by the loan you choose and the lender you work with. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions