Everything You Need to Know About Fixed Rate Investment Loans

A fixed rate on an investment loan locks your repayments for a set period, usually one to five years. Whether that works in your favour depends on where you are in your investment journey and what you're trying to achieve in the next decade.

Why Fixed Rates Appeal at Different Life Stages

Fixed rates offer certainty over repayments, which matters most when your income is less predictable or when you're planning for other financial commitments. Someone in their early thirties with young children values that certainty differently to someone in their fifties with grown children and a stable income.

Consider a buyer in their mid-thirties purchasing their first investment property. They've saved a deposit, they're still managing a mortgage on their home, and their household income is steady but not yet at its peak. A three-year fixed rate at that stage gives them time to settle into the additional repayments without worrying about rate movements while their children are in childcare.

That same buyer, twenty years later, might look at a fixed rate differently. Their income is higher, their home loan is smaller, and they're focused on holding property for the long term. At that stage, flexibility often outweighs certainty, and a variable rate allows them to make extra repayments or access redraw without penalty.

When Certainty Matters More Than Flexibility

A fixed rate suits you when the next few years involve other financial commitments that leave little room for surprises. If you're planning parental leave, starting a business, or sending children to private school, knowing your investment loan repayment won't change can be worth the trade-off in flexibility.

In our experience, buyers who fix during this stage are not trying to time the rate cycle. They're trying to protect their cashflow during a period when income might drop or expenses will rise. That's a valid reason to fix, regardless of where rates are headed.

The limitation is that most fixed rate investment loans restrict extra repayments and don't allow redraw. If you receive a bonus or sell another asset during the fixed period, you can't use those funds to reduce your loan without paying break costs. That matters less if your focus is cashflow stability, but it can feel restrictive if your circumstances improve and you want to pay down debt faster.

How Fixed Rates Fit a Portfolio Growth Strategy

When you're building a portfolio across multiple properties, fixing all your loans at once reduces your flexibility to refinance or restructure. If one property increases in value and you want to release equity to fund another purchase, a fixed rate on that loan can delay the process or add cost.

A split structure, where part of the loan is fixed and part is variable, gives you some certainty while keeping options open. You might fix sixty percent of the loan to cover your minimum repayments and leave forty percent variable so you can make extra payments or access funds if needed.

This approach works well when you're in your forties or fifties and still acquiring property but want to manage risk as your portfolio grows. You're not trying to eliminate rate risk entirely, but you're not leaving yourself fully exposed either.

The Cost of Breaking a Fixed Rate Early

Break costs apply when you pay out or refinance a fixed rate loan before the fixed period ends. The cost depends on the difference between your fixed rate and the rate the lender can now earn by lending that money elsewhere. If rates have fallen since you fixed, the break cost can be significant.

We regularly see investors underestimate this cost when they fix without considering how likely they are to sell, refinance, or restructure before the term ends. If you're holding a property long term and don't plan to access equity, that risk is low. If you're in a growth phase and might want to leverage equity within two years, fixing for five years creates a problem.

You can find more detail on how these costs are calculated and when they apply in our guide to fixed rate expiry.

Variable Rates and Long-Term Wealth Building

Once you're past the stage of needing certainty, a variable rate usually serves you better. You can make extra repayments when cashflow allows, access redraw if needed, and refinance without penalty if a better product becomes available.

As an example, someone in their late fifties with two investment properties and a paid-off home is more focused on holding those properties through retirement than on acquiring more. Their income is stable, and they want the option to reduce debt before they stop working. A variable rate with offset or redraw lets them direct surplus income toward the loan without restriction.

At this stage, the risk of rate rises is still present, but it's manageable because their income can absorb fluctuations and they're not stretched across multiple commitments. The flexibility to pay down debt faster outweighs the uncertainty of rate movements.

How Recent Tax Changes Affect Your Fixed Rate Decision

From July 2027, negative gearing rules change for established residential properties purchased after May 2026. Losses on those properties can only be offset against rental income or capital gains from residential property, not against wage income. The fifty percent capital gains tax discount is also being replaced with an indexed model and a minimum thirty percent tax on gains.

If you bought an investment property before mid-May 2026, the old rules still apply to you. If you're buying now or planning to buy an established property in the near future, the tax benefit of negative gearing is reduced, which changes the cashflow equation.

A fixed rate in this environment still provides certainty, but the reduced tax deduction means your after-tax cost is higher. That might influence whether you fix at all, or whether you fix for a shorter term while you assess how the changes affect your returns. If you're considering new builds, the old CGT discount rules remain an option, which may shift your strategy toward construction or off-the-plan purchases.

You can read more about how investment loan structures interact with tax in our overview of investment loans.

When to Fix and When to Stay Variable

Fix when you need certainty for a specific period and you're confident you won't need to refinance, sell, or access equity before the term ends. That usually aligns with stages of life where income is less flexible or other commitments are taking priority.

Stay variable when your focus is flexibility, portfolio growth, or paying down debt faster. That tends to suit investors who are either just starting out and want room to adjust their strategy, or those who are later in their journey and want to reduce debt before retirement.

There's no universal rule. Your decision should reflect where you are now, what you're planning in the next few years, and how much room you have in your cashflow to manage uncertainty. If you're genuinely unsure, a split structure lets you test both approaches without fully committing to either.

Call one of our team or book an appointment at a time that works for you. We'll walk through your current position, your plans for the next few years, and which loan structure gives you the certainty or flexibility you need without locking you into something that doesn't fit.

Frequently Asked Questions