When to Lock Fixed Rates on Investment Loans

A fixed rate on an investment loan locks your interest cost for a set period, usually between one and five years.

That certainty matters when you are holding a rental property in Campbelltown, where vacancy periods can stretch rental income and variable rate movements can turn a marginal cashflow positive property into a drain on your other income. But fixed rates come with features that either support your investment strategy or work against it, and those features are not uniform across lenders.

Interest-Only Repayments on Fixed Rate Investment Loans

Interest-only repayments reduce your required monthly outgoings by removing the principal component, freeing up cashflow for other investments or to cover holding costs during vacancy.

Most lenders offer interest-only terms on fixed rate investment loans, but the maximum term and LVR limits vary. A typical structure allows interest-only for up to five years on loans with an LVR of 80 per cent or less. Above that threshold, lenders often require principal and interest repayments or shorten the interest-only period to two or three years. Consider an investor refinancing a Campbelltown property purchased before mid-2026 who wants to leverage equity for a second purchase. Fixing the rate on an interest-only basis for three years keeps the repayment low while the second property settles and stabilises. If rental income on the original property is $550 per week and the loan is $450,000 at a fixed rate, the interest-only repayment might sit around $2,300 per month, compared to $2,900 on principal and interest. That $600 difference per month can be redirected toward the deposit or holding costs on the next property.

The risk is that interest-only fixed loans revert to principal and interest at the end of the fixed term, and if rates have risen in the meantime, the reversion rate will be higher and the repayment will include principal. That double impact can push a property from positive to negative cashflow overnight if you have not planned for it.

Break Costs and Early Exit Penalties

Breaking a fixed rate loan before the end of the term typically triggers a break cost, calculated as the economic loss to the lender from the difference between your fixed rate and the current wholesale rate for the remaining term.

If you fixed at 5.5 per cent for five years and wholesale rates have since dropped to 4.8 per cent, the lender will charge you the present value of that 0.7 per cent difference for the remaining period. Break costs can run into tens of thousands of dollars on large investment loans, especially if you are only one or two years into a five-year term. In a scenario where an investor needs to sell a Campbelltown property early because their employment circumstances change, or they want to refinance to access equity after a strong price rise, the break cost can wipe out much of the benefit. Some lenders allow portability, meaning you can transfer the fixed rate loan to a new property without breaking the contract, but this feature is not standard and often comes with conditions around timing, loan amount and property type. Other lenders offer partial portability or partial break fee waivers if you are refinancing with the same institution. If you are considering a fixed rate investment loan and there is any chance you will sell, refinance or pay down the loan ahead of schedule, confirm the break cost formula and any portability options before locking in.

Offset Accounts and Redraw on Fixed Investment Loans

Most fixed rate investment loans do not offer offset accounts, and where they do, the offset benefit is partial or the rate is higher than a standard fixed product.

An offset account linked to an investment loan reduces the interest charged by offsetting your savings balance against the loan balance. On a variable rate loan, a full offset is common. On a fixed rate loan, lenders either do not offer offset at all, or they offer a partial offset such as 40 per cent or 60 per cent of the balance. Redraw facilities on fixed loans are similarly restricted. Many lenders allow redraw but cap the number of redraws per year or charge a fee per transaction, and some do not allow redraw at all during the fixed period. For investors who plan to park rental income or other savings in an offset to reduce interest, a fixed rate without offset means that benefit is lost for the duration of the fixed term. In practice, this can add several hundred dollars per month to the effective interest cost, depending on the offset balance you would otherwise hold. If cashflow flexibility and access to surplus funds matter more than rate certainty, a variable rate with full offset will often deliver a lower net interest cost, even if the variable rate itself is slightly higher than the fixed rate on paper.

Split Loan Structures for Investment Properties

A split loan structure divides your total borrowing into two or more portions, typically one fixed and one variable, each with its own rate, repayment type and features.

Splitting an investment loan gives you partial rate protection while retaining access to offset, redraw and the ability to make extra repayments on the variable portion without incurring break costs. The most common split is 50/50, but you can structure it as 70/30, 60/40 or any other ratio depending on your risk tolerance and cashflow needs. For an investor in Campbelltown holding a $500,000 loan, fixing $300,000 at a known rate for three years and leaving $200,000 variable with offset attached means the repayment on the fixed portion is locked, while surplus cashflow can sit in the offset linked to the variable portion and reduce interest there. This structure works particularly well when you expect rates to move but are not certain of the direction, or when you want the security of a fixed repayment on part of the loan but need the flexibility to pay down or redraw on the rest. Lenders treat each split as a separate loan facility, so you will have two loan accounts, two sets of terms and two rate expiry dates to manage. Not all lenders offer splits on investment loans, and some apply higher rates or restrict features on split structures, so confirm the terms before proceeding.

Rate Lock and Application Timing

A rate lock allows you to secure a fixed rate for a set period, usually 90 days, while your loan application is assessed and the property settles.

Without a rate lock, the fixed rate you are quoted at application may not be the rate you receive at settlement, particularly if rates rise during the assessment or settlement period. Rate locks are common on home loans but less consistently offered on investment loans, and some lenders charge a fee to lock the rate. If you are buying an investment property off the plan or in a competitive market where settlement is delayed, a rate lock protects you from rate increases between contract and settlement. For investors in growth areas around Campbelltown such as Oran Park or Gregory Hills, where off-the-plan purchases are common and settlement can be six to twelve months away, the difference between a locked rate and a market rate at settlement can be significant. Conversely, if rates fall during the lock period, you are committed to the higher locked rate unless the lender offers a one-way lock that allows you to take a lower rate if available at settlement. Always clarify whether the lock is one-way or two-way, the lock period and any associated fees before committing.

Fixed Rate Investment Loans and the New Negative Gearing Rules

From the 2027-28 income year, losses on established investment properties acquired after 12 May 2026 can only be offset against income from residential properties, not against salary or other income.

This change, introduced under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, means that if your Campbelltown investment property runs at a loss during the fixed rate period, you cannot deduct that loss against your wage income in the same year unless the property was purchased before 12 May 2026 or qualifies as an eligible new build. Losses can be carried forward to offset future residential property income, including capital gains. For investors who relied on negative gearing to reduce their taxable income and improve cashflow, this changes the appeal of fixed rate loans on newly acquired established properties. A fixed rate investment loan on an eligible new build, however, preserves full negative gearing treatment, meaning interest and holding costs remain deductible against all income. If you are considering a fixed rate loan on a new build property in one of the developing estates around Campbelltown, confirm with your accountant that the property meets the ATO definition of an eligible new build, which includes dwellings constructed on vacant land and knock-down rebuilds that increase the total number of dwellings on the site. Properties that have been occupied for more than 12 months before sale do not qualify, even if the dwelling itself is new.

When Fixed Rates Work Against Portfolio Growth

Fixed rate loans limit your ability to access equity during the fixed period without triggering break costs, which can delay or prevent you from buying your next investment property.

If your Campbelltown property increases in value and you want to leverage that equity for a second purchase, releasing equity from a fixed loan requires either a refinance, which attracts break costs, or a top-up, which many lenders do not allow on fixed products. Variable rate loans, by contrast, allow you to apply for equity release or refinance without penalty, giving you faster access to capital for the next deposit. For investors focused on building a portfolio rather than holding a single property long term, variable or split structures generally support faster growth. Fixed rates work when your primary goal is to stabilise cashflow on a property you intend to hold through the fixed period without further borrowing, refinancing or selling. They also work when you are holding a property through a renovation or development approval process and need repayment certainty while the property is not generating rental income.

Call one of our team or book an appointment at a time that works for you. We will structure your investment loan with the features that support your property strategy, not just the lowest advertised rate.

Frequently Asked Questions