Many borrowers are now reaching the end of their fixed-rate terms and weighing up whether to refinance or stay with their current lender.
Learn how break costs are calculated and when they may apply.
See examples of when breaking early could or may not make sense.
Understand your options and speak to a broker before making changes.
Many Australians who fixed their home loans during the low-rate period between 2020 and 2022 are now coming to the end of those terms in 2025.
Some are considering refinancing early to access better features, flexibility, or potentially more competitive variable rates, but doing so could trigger break costs.
As of November 2025, many lenders’ fixed home loan rates range roughly between 5.9% and 6.8%, while variable rates typically sit between 5.7% and 6.5%.
It’s important to understand how break costs work before deciding whether to refinance or remain on your current loan.
What are break costs?
Break costs (also called break fees or early repayment costs) are fees your lender may charge if you end, refinance, or make large extra repayments on a fixed-rate loan before the term expires.
These fees compensate the lender for the interest they expected to receive over the fixed term.
Why it matters: If you refinance or repay your loan before the fixed period ends, the lender may face a loss due to changes in market rates and passes this cost on to you.
When are break costs incurred?
You may incur break costs when you:
refinance your loan before the fixed term ends
make extra repayments above the allowed limit
pay out or close your loan early (for example, after selling the property)
Example:
Emma fixed her $500,000 home loan at 2.2% in 2021 for five years. In 2025, she still has 12 months left but wants to refinance to access an offset account.
Her lender quotes a $4,800 break cost, but refinancing could save her around $6,500 in interest and fees over the next two years.
Example only. Actual figures depend on your lender, loan type, and market rates. Seek guidance from your broker before refinancing a fixed loan.
How are break costs calculated?
Each lender has its own method, but the general formula is:
Break cost = Remaining balance × Rate differential × Remaining fixed term (in years)
This means the larger your loan or the bigger the difference between your fixed rate and current market rates, the higher the potential fee.
Tip: Ask your lender for a written break cost estimate before making any changes. Many lenders can provide this without triggering the fee.
Example break cost scenarios
Loan amount | Fixed rate | Market rate | Years left | Estimated break fee* |
$400,000 | 2.2% | 6.0% | 1 year | $3,500 |
$600,000 | 2.0% | 5.8% | 2 years | $9,800 |
$750,000 | 2.5% | 6.5% | 3 years | $15,000 |
Estimates only. Actual fees vary by lender and calculation method.
Should I break my fixed loan early?
Breaking your fixed-rate mortgage can make sense in some cases, but it’s not always financially beneficial.
Factors to consider:
Time left on your fixed term: Fees are usually higher if you’re early in the term.
Rate difference: The greater the gap between your rate and the lender’s current rate, the higher the fee.
Your refinancing goal: Are you chasing lower rates, offset flexibility, or equity access?
Potential savings: Weigh expected interest savings against any break cost.
Breaking may be worth considering if:
You’re more than halfway through your fixed term.
Your fixed rate is significantly higher than current market rates.
You need features your current loan doesn’t offer, such as an offset or redraw facility.
It may not be worth breaking if:
You have less than 12 months left of your fixed term.
The break cost exceeds your potential savings.
You plan to sell or refinance again soon.
Use our Fixed Rate Expiry Calculator to see how long you have left and what options might suit you.
Note: Every situation is different, and potential savings depend on your loan and market conditions.
Avoiding break costs in the future
Break costs can’t always be avoided, but you can plan ahead to reduce the risk next time.
Understand your loan terms upfront: Ask how break costs are calculated before fixing.
Consider a split loan: Fix part of your loan and keep the rest variable to retain flexibility.
Limit extra repayments: Check your lender’s repayment cap during fixed periods.
Review before the term ends: Start comparing rates 2-3 months before expiry to avoid lapses onto higher revert rates.
Why it helps: Planning ahead gives you flexibility without unexpected costs.
Expired vs active fixed terms
If your fixed term is expiring soon:
Start comparing options 2-3 months before the end of your term.
You can refinance or switch loans with no break fee once the fixed period ends.
If your fixed term still has more than 6-12 months remaining:
Weigh whether interest savings outweigh the break cost.
Consider using offset or redraw features on your current loan to manage cash flow.
Ask your broker to model potential savings under different scenarios.
Compare, calculate, and confirm
Breaking a fixed-rate loan can sometimes be worthwhile, but it’s a numbers game.
The right approach is to compare your potential savings, calculate your estimated fee, and confirm your decision with expert advice.
Book a free^ chat with an Aussie Broker to calculate potential break costs and determine whether refinancing makes sense for your situation.