Current and expected market conditions play a pivotal factor in the decision which led to thousands of Australians taking the opportunity to fix their mortgages when interest rates hit record lows in Australia. However, it is critical to note that whenever there is a fixed rate, there is also a revert rate for when the fixed term expires. With $141 billion worth of fixed rate mortgages set to expire in the coming months, understanding your revert rate is paramount to keeping on top of your finances.

A revert rate is the interest rate that automatically applies to your home loan once your fixed-rate period has ended. The rate is usually the standard variable rate for your specific home loan product, and in this rising interest environment, is likely higher than the previous fixed-rate of your loan. Lenders may notify you of your fixed term expiry and offer you another fixed term. But if you decide not to do so, the revert to the standard variable rate comes into effect.

The standard variable rate is the interest rate that applies to a lender’s home loan product that you are on. It can be influenced by factors such as changes in the cash rate set by the Reserve Bank of Australia, market competition, and the lender’s funding costs. As a result, it can fluctuate over time, resulting in changes to your monthly repayments.

Knowing your revert rate allows you to plan your finances accordingly. Remember, borrowers still have the option to refinance their loan, possibly with extra equity from paying off the principal over the fixed term. Shop around and speak to a lending professional to know your options and avoid the proverbial fixed rate cliff of suddenly being hit by large interest rate repayments.

Any advice provided is general in nature and should be considered in line with your financial situation, needs and objectives.