If interest rates rise while your loan application is processing, your fixed rate could increase before settlement. A rate lock protects your rate so your repayments remain predictable.
A rate lock is an optional feature on fixed-rate home loans that guarantees your quoted interest rate for a specific time frame regardless of market rate increases before settlement.
It enables you to secure a rate, meaning even if interest rates rise, yours won’t. Lenders usually charge a fee for this feature, but speak to your broker as this fee varies and some lenders may offer it for free.
The amount of time the guarantee lasts will also vary between lenders, for example 60 or 90 days, so if you have a longer settlement, your broker can discuss which lenders may be right for you.
Feature | Details |
Typical cost | Ranges from $0 (free promotion) to a fixed fee ($350–$750) or ~0.15% to 0.20% of the total loan amount. For example, for a $400,000 loan this amount could be around $800. The average is lower than this and tends to be around $750 for a $500,000 loan. |
Coverage window | Usually 60 to 90 days from application submission or approval date. |
Fee refundability | Most fixed rate protection fees are non-refundable, even if your application is declined or you cancel the loan. |
Payment timing | Payable upon application submission or charged to the loan account at settlement. |
So for a $400,000 loan this amount could be around $800. The average is lower than this and tends to be around $750 for a $500,000 loan.
Opting for a rate lock is generally recommended when:
Your broker can run the calculations for you to determine how much the interest rate would need to change to warrant the upfront fee.
It is important to keep in mind that if a lender lowers its interest rate and you have opted to lock yours, you are not necessarily guaranteed the lower rate. Each lender has a different policy around this and you may need to negotiate to see if you can cancel the agreement to access the lower interest rate, which your broker can do on your behalf.
If you are considering whether to lock your interest rate, speak to your broker to understand the pros and cons and calculate your potential savings.
What happens if settlement is delayed past expiry?
If your settlement takes longer than expected and your rate lock expires:
When does the rate lock period start?
Depending on the lender, the rate lock period begins either on the day you submit your rate lock request form or on the date your loan receives formal (unconditional) approval.
Can I cancel a rate lock after requesting it?
Yes, but the fee is generally non-refundable. If you cancel the rate lock or change lenders, you will forfeit the fee paid.
Where can I find the official terms for my loan’s rate lock?
Specific terms, conditions and fee structures are outlined in the lender’s Target Market Determination (TMD) and Key Facts Sheet (KFS), which your broker provides during the application process.
