What Not to Do When Switching Fixed to Variable

Your fixed rate has ended and you're now sitting on your lender's standard variable rate, which is probably costing you more than it should.

The decision you're facing is whether to lock in another fixed term or move to a variable rate that gives you flexibility and potentially pays less interest. For bricklayers who might need access to equity for tools, a ute upgrade, or an investment property down the line, that flexibility matters. But refinancing to switch from fixed to variable isn't just about picking a lower number on a comparison site. Get the timing or structure wrong and you'll pay for it.

Fixed Rate Break Costs: When They Apply and When They Don't

If your fixed rate period has ended, there are no break costs. You can refinance or switch products without penalty. Break costs only apply if you exit a fixed rate loan before the agreed term finishes, and they can run into thousands of dollars depending on how much rates have moved since you locked in.

Once your fixed term expires, your loan automatically rolls onto your lender's standard variable rate, which is typically higher than the discounted variable rates they offer to new customers. This is the point where most bricklayers should be looking at their options. If you've been on a fixed rate for three or four years and haven't reviewed your loan since, you're likely paying more than you need to.

Consider a bricklayer who fixed at 2.1% three years ago and has just rolled onto a standard variable rate of 7.2%. He's now paying roughly $400 more per month on a typical loan than someone who refinanced to a discounted variable rate of 6.1%. Over a year, that's close to $5,000 in additional interest. He doesn't need to refinance to another fixed product just because that's what he had before. If he wants the ability to make extra repayments, access a redraw or offset account, or pull equity out in six months without restrictions, a variable rate gives him that without the cost.

Why Variable Rates Suit Bricklayers Who Want Flexibility

Variable rate loans let you make unlimited extra repayments without penalty, access funds through redraw or offset accounts, and refinance or restructure your loan whenever you need to. For bricklayers who have irregular income due to project-based work or seasonal demand, that flexibility is worth having.

Fixed rate loans typically restrict extra repayments to a certain amount per year, often around $10,000 to $30,000 depending on the lender. Go over that and you'll pay a fee. They also don't usually come with offset accounts, which means any cash you've got sitting in a transaction account isn't reducing the interest you're paying on your mortgage.

If you're planning to access equity within the next 12 to 24 months to buy an investment property, upgrade work vehicles, or fund a renovation, a variable rate loan makes that process faster and cheaper. You won't need to break a fixed term or wait until it expires. You can apply for a top-up or refinance structure as soon as the equity is there and your income supports it. We regularly see bricklayers who locked into fixed rates during the low-rate period and are now stuck waiting for their term to end before they can move on an investment opportunity. That delay costs money.

What to Check Before You Refinance to Variable

Before you lodge a refinance application, check your current loan balance, your property's valuation, and your repayment history. Lenders will look at all three when assessing your application, and any issues with serviceability or valuation can slow things down or reduce the amount you're approved for.

If you've been making interest-only payments during your fixed term, switching to a variable rate with principal and interest repayments will increase your monthly costs. Run the numbers before you commit. Some lenders will let you stay on interest-only for a period if your income and loan-to-value ratio support it, but most will push you onto principal and interest once you refinance.

Your income structure matters too. If you're a bricklayer working as a sole trader or through a company, lenders will assess your income differently depending on how long you've been self-employed and what your tax returns show. If your most recent financials show a dip due to weather, supply delays, or taking time off, that can affect your borrowing capacity. It's worth reviewing your loan health check before you apply so you know where you stand and whether there's anything you need to address first.

If you're refinancing to access equity at the same time as switching to variable, the lender will order a valuation. If the valuation comes in lower than you expected, it can reduce the amount of equity you can access or increase your loan-to-value ratio, which may affect your rate or require lenders mortgage insurance. Don't assume your property is worth what the house down the street sold for last month. Valuations are conservative, and if your area has seen a recent price correction, that'll show up in the assessment.

Refinancing to Variable Without Losing Your Offset or Redraw

Not all variable rate loans come with the same features, and if you're used to having an offset account or redraw facility, make sure your new loan includes them. Some lenders offer basic variable rate products with a lower advertised rate but no offset or limited redraw. If you're relying on those features to manage your cashflow or reduce interest, a basic package won't work.

Offset accounts are particularly useful for bricklayers who get paid in lumps after completing a job. Instead of that money sitting in a savings account earning 2% interest while you're paying 6% on your mortgage, it sits in an offset account linked to your loan and reduces the interest you're charged every day. Over the life of the loan, that can save tens of thousands in interest without requiring you to lock the funds away or lose access to them.

Redraw facilities let you pull out any extra repayments you've made above the minimum, which is useful if you need to cover an unexpected cost or a gap between jobs. Some lenders place conditions on redraw, such as minimum withdrawal amounts or processing times, so check the terms before you sign. If you need regular access to those funds, an offset account is usually the more practical option.

When you're comparing variable rate loans, look at the comparison rate as well as the advertised interest rate. The comparison rate includes most fees and gives you a more accurate picture of what the loan will cost over time. A loan with a slightly higher interest rate but lower fees and an offset account can work out cheaper than one with a rock-bottom rate and nothing else included. For more on how rate structures affect your repayments, see our guide on getting a lower interest rate.

When Refinancing to Variable Doesn't Make Sense

If you're planning to sell your property in the next 12 months, refinancing probably isn't worth the cost or effort. You'll pay application fees, valuation fees, and possibly discharge fees when you sell, and you won't be on the new loan long enough to recoup those costs through lower interest payments.

Similarly, if your current lender offers you a retention rate that's competitive with what you'd get by refinancing elsewhere, and your loan already has the features you need, switching lenders might not be necessary. Some lenders will drop your rate by 0.5% to 1% if you call and ask, particularly if your loan-to-value ratio has improved since you first borrowed. It's worth having that conversation before you go through a full refinance application.

If you're concerned about rates rising further and want the certainty of knowing exactly what your repayments will be for the next few years, a variable rate might not suit your situation. Variable rates move with the market, and while they're currently sitting below where fixed rates were during the low-rate period, they can and do increase. If your budget is tight and you can't absorb a rate rise of 0.5% to 1% without stress, locking in a fixed rate might be the safer call, even if it costs you some flexibility.

Call one of our team or book an appointment at a time that works for you. We'll look at your current loan, what you're paying, and what's available right now, and we'll tell you whether refinancing makes sense or whether you're better off staying put.

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