Why Should First Home Buyers Consider Fixed Rates?

What a Fixed Rate Loan Actually Locks In

A fixed interest rate holds your repayment amount steady for a set period, usually between one and five years. Your monthly repayment won't change during that fixed term, even if the Reserve Bank lifts the cash rate or lenders adjust their pricing.

For someone buying their first home, this certainty makes budgeting more predictable. You know exactly what's going out each month, which matters when you're juggling settlement costs, furniture purchases, and the usual expenses that come with moving into your own place. The catch is that fixed rates often come with restrictions on extra repayments and no offset account access, which can limit how quickly you pay down your loan.

The Trade-Off Between Certainty and Flexibility

Fixed rates appeal when you want to avoid repayment increases, but they limit what you can do with your loan. Most lenders cap extra repayments on fixed loans at around $10,000 to $20,000 per year without penalty. If you pay more than that, you'll usually be charged break costs. You also can't link an offset account to a fixed rate loan, which means any savings you hold won't reduce the interest you're charged.

Variable rates let you make unlimited extra repayments and use an offset account, but your repayments will rise if interest rates go up. For first home buyers who expect their income to grow or plan to make lump sum payments from bonuses or tax refunds, a variable rate or split loan often makes more sense than locking everything in.

How WA First Home Buyers Are Using Split Loans

Many buyers across Perth and regional WA are splitting their loan between fixed and variable portions. This gives you some repayment stability while keeping access to features like offset accounts and unlimited extra repayments on the variable portion.

Consider a buyer purchasing in Joondalup who borrows $450,000 after using the First Home Guarantee to avoid Lenders Mortgage Insurance with a 5% deposit. They might fix $300,000 for three years to protect most of their repayment from rate rises, while keeping $150,000 on a variable rate with an offset account. This lets them park savings from a tax refund or work bonus in the offset, reducing interest on that portion of the loan, while still having certainty on two-thirds of their borrowing.

The outcome is a middle path: you're not fully exposed to rate movements, but you're not locked out of features that help you pay the loan down faster either.

When Fixed Rates Make Sense for WA First Home Buyers

Fixed rates suit buyers who prioritise budget certainty over flexibility, particularly if your income is stable and you don't expect to make large extra repayments in the next few years. If you're stretching your borrowing capacity to buy in a suburb like Applecross or near the city, knowing your repayment won't jump can give you breathing room while you settle into homeownership.

Fixed rates also make sense if you're buying under one of WA's first home buyer concessions and want to lock in a rate before potential increases. WA recently lifted the First Home Owner Grant property cap to $800,000 and increased stamp duty exemption thresholds, which means more buyers are entering the market. If you're buying a new build to access the grant, fixing at least part of your loan can protect you from rate volatility during construction.

That said, if you're earning variable income as a FIFO worker or expect a pay rise in the next year or two, a variable rate or split structure might serve you better in the long run.

What Happens When Your Fixed Rate Ends

Your fixed rate term doesn't renew automatically at the same rate. When the fixed period ends, your loan will revert to the lender's standard variable rate unless you negotiate a new fixed term or refinance to another lender.

The revert rate is almost always higher than the discounted variable rate you'd get as a new customer, which is why most borrowers either refinance or renegotiate around six months before their fixed term expires. If you don't act, you could end up paying hundreds of dollars more each month without realising it.

For first home buyers, this is worth planning for early. When your fixed term is within six months of expiring, speak to a broker about what rates are available. If your property has increased in value and you've paid down some of the loan, you might have access to lower rates than when you first borrowed.

Break Costs and Early Exit Penalties

If you need to exit a fixed rate loan early, whether to sell, refinance, or make large extra repayments, you'll likely face break costs. These are calculated based on the difference between your fixed rate and the current wholesale rate for the remaining fixed term. If rates have fallen since you fixed, the break cost can be significant.

In a scenario where someone fixed at 5.8% for five years and rates have since dropped, breaking that loan two years in could cost thousands of dollars. The exact amount depends on your loan balance, the rate difference, and how much time is left on the fixed term. Lenders use different calculation methods, so break costs vary between lenders even if the rate movement is the same.

This is one reason why fixing 100% of your loan can be risky. If your circumstances change and you need to sell or refinance, you're locked in unless you're willing to pay the exit fee.

How First Home Buyer Schemes Interact With Fixed Rates

The expanded First Home Guarantee lets eligible buyers purchase with a 5% deposit without paying Lenders Mortgage Insurance, which can save tens of thousands of dollars upfront. You can use this scheme with either a fixed or variable rate loan, and many lenders offer both options under the program.

If you're combining the guarantee with WA's stamp duty exemptions or the First Home Owner Grant, your upfront costs are already lower, which means you might have more flexibility in how you structure your loan. Some buyers use the savings from avoiding LMI to increase their deposit slightly, which improves their interest rate and borrowing terms regardless of whether they fix or go variable.

The First Home Super Saver Scheme is another option worth considering before you apply. You can contribute up to $15,000 per year into super and withdraw up to $50,000 total to use as a deposit. Because contributions are taxed at 15% instead of your marginal rate, this can accelerate your savings if you're planning to buy within the next few years.

Fixed Rates in Regional WA and the Regional First Home Buyer Guarantee

If you're buying in regional WA, the Regional First Home Buyer Guarantee offers similar benefits to the standard guarantee but applies to regional postcodes. You can still purchase with a 5% deposit and avoid LMI, and you can choose either a fixed or variable rate.

Regional areas often have lower median prices than Perth, which means your loan size might be smaller and your repayments more manageable. Fixing part or all of your loan in a regional location can make sense if your income is tied to industries with seasonal variation, such as agriculture or tourism, because it gives you consistent repayments even when your income fluctuates.

Some regional buyers split their loan to match income patterns, fixing a base amount to cover essential costs and keeping a variable portion to pay down faster when income is higher.

Call one of our team or book an appointment at a time that works for you. We'll compare fixed, variable, and split loan options across lenders and help you structure a loan that fits your budget and how you plan to use your property over the next few years.

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