Why First Home Buyers Should Lock Fixed Rates

Fixed rate loans lock your repayments for an agreed period, which matters when you work rotating rosters and can't afford unpredictable jumps in weekly outgoings.

For paramedics buying their first property, the decision between fixed, variable, or split loan structures comes down to three factors: deposit size, how quickly you plan to reduce the loan, and whether you need access to your savings after settlement. Each structure offers different features, and those features change what you can do with your loan once it settles.

Fixed Rate Period Length and What You Lock In

Most lenders offer fixed periods from one to five years. You lock the interest rate, which means your repayment amount does not change during that period regardless of rate movements. If the Reserve Bank lifts rates, your repayments stay the same. If rates drop, you remain locked at the higher rate until the fixed term ends.

Consider a paramedic purchasing at the suburb's current median with a 10% deposit through the Australian Government 5% Deposit Scheme. Locking a three-year fixed rate means knowing exactly what leaves your account each fortnight for the next 156 weeks. That certainty aligns with base salary and penalty rate structures, which makes budgeting more predictable when your fortnightly income already varies depending on whether you worked nights, weekends, or public holidays.

Fixed terms longer than three years reduce flexibility. Five-year fixed loans often carry higher rates than shorter terms, and you remain locked even if market rates fall significantly in year four. Shorter fixed periods, such as one or two years, offer lower rates but expose you to refinancing decisions sooner.

What You Give Up When You Fix

Fixed rate loans typically do not include offset accounts, and if they do, the offset functionality is limited or attracts a higher rate. An offset account is a transaction account linked to your loan where the balance reduces the interest charged. If you hold $10,000 in an offset and owe $400,000, you only pay interest on $390,000.

Without an offset, any savings you hold after settlement sit in a separate account and earn minimal interest rather than reducing your loan interest. For paramedics who receive annual leave loading, overtime payments, or shift penalties in lump amounts, losing offset functionality means those funds do not work to reduce your loan balance until you make an extra repayment.

Most fixed loans allow a redraw facility, which lets you access extra repayments you have made above the minimum. Redraw is not the same as an offset. Extra payments reduce your loan balance immediately, but redraw access can be restricted, delayed, or subject to fees depending on the lender. Some lenders allow unlimited free redraws, others cap the number per year, and some do not offer redraw at all on fixed products.

Fixed loans also cap extra repayments. Most lenders allow between $10,000 and $30,000 in additional payments per year without penalty. If you exceed that cap, you may be charged break costs, which are explained further below.

Break Costs and How They Are Calculated

If you exit a fixed rate loan before the term ends, most lenders charge break costs. These costs compensate the lender for the difference between the rate you locked and the rate they can now lend that money at. Break costs are not a flat fee. They are calculated based on the remaining fixed term, the size of your loan, and the movement in wholesale interest rates since you locked your rate.

In a scenario where you fixed at 6.2% for five years and wholesale rates have since dropped, exiting in year two could trigger break costs in the tens of thousands of dollars. If rates have risen since you fixed, break costs may be zero because the lender can re-lend at a higher rate. Lenders provide a break cost estimate on request, but the figure is not locked until the day you actually break the loan.

Break costs apply when you sell the property, refinance to another lender, or make extra repayments beyond the annual cap. For paramedics transferring between states or taking contract roles in regional areas, an unexpected relocation can make break costs a significant unplanned expense if you need to sell within the fixed period.

Split Loans and Why They Suit Shift Workers

A split loan divides your total borrowing between fixed and variable portions. You might fix 50% for three years and leave 50% variable. The variable portion includes full offset and redraw functionality, unlimited extra repayments, and no break costs if you refinance or sell.

Splitting gives you partial rate protection while keeping access to the features you lose when you fix. If you are buying with a 10% deposit and expect lump sum income from overtime or leave payments, putting half your loan on variable means those payments can sit in an offset and reduce interest daily, while the fixed portion keeps your minimum repayments stable.

In our experience, paramedics on rotating rosters prefer splits because fortnightly income fluctuates and having an offset available means surplus pay from a high-penalty fortnight can offset the loan until the next low-penalty fortnight. The fixed portion covers your minimum commitment, and the variable portion absorbs income volatility.

Split ratios are flexible. You can split 30/70, 60/40, or any other combination. You can also stagger fixed terms, fixing one portion for two years and another for four years, so they expire at different times and you are not forced to refinance your entire loan in a single rate environment.

Fixed Rates and Low Deposit Structures

If you are accessing the Australian Government 5% Deposit Scheme, confirm that your chosen lender offers fixed and split loan options under the scheme. Not all participating lenders provide the same loan features. Some limit scheme borrowers to variable-only loans, others allow splits, and a smaller number offer full fixed terms.

Lenders also assess your borrowing capacity differently depending on the loan structure you choose. When you apply for a fixed loan, some lenders assess your ability to service the loan at the fixed rate you are applying for. Others assess you at a higher buffer rate, typically 3% above the fixed rate, to ensure you can still afford repayments if rates rise after your fixed term ends. That buffer can reduce your maximum borrowing amount compared to a variable-only application, which may affect which properties fall within your price range.

For paramedics applying with a 5% or 10% deposit, the buffer rate used by the lender determines whether you can borrow enough to meet the property price caps under the scheme. Applying for a three-year fixed loan at 6% might be assessed at 9%, and that assessment rate directly reduces the amount you can borrow. Choosing a split loan instead, with only part of the borrowing fixed, can reduce the impact of the buffer and keep your borrowing capacity higher.

Refinancing After Your Fixed Term Ends

When your fixed period ends, your loan automatically rolls to the lender's variable rate unless you choose to refix or refinance. The variable rate your loan rolls to is often higher than the headline variable rate advertised to new customers. Lenders call this a revert rate or standard variable rate, and it can sit 0.5% to 1% above their current discounted variable products.

Refinancing before your fixed term expires triggers break costs. Refinancing after the term ends does not. For first home buyers who fixed at the time of purchase, the end of the fixed term is the cleanest opportunity to reassess your loan structure, compare lenders, and move to a product with offset functionality or a lower rate without penalty.

Refinancing also lets you access any equity you have built. If your property has increased in value or you have reduced your loan balance below 80% of the property value, you can refinance without LMI and access loan features that were not available when you first borrowed at 90% or 95% LVR. Refinancing into an offset-equipped variable loan after a three-year fixed term gives you flexibility you did not have during the fixed period, and the timing avoids break costs entirely.

Call one of our team or book an appointment at a time that works for you. We work with lenders who understand shift work income and offer fixed, variable, and split loan structures through the 5% Deposit Scheme and other low deposit options available to qualified paramedics.

Frequently Asked Questions