Rate locks allow you as a prospective property buyer to guarantee an interest rate on a fixed rate new or refinanced home loan between the time you apply and the time your property settles. This can be useful in times when home loan interest rates are tipped to increase or are already on the move.
Effective Date

Varied from lender to lender – usually at application, when the lock fee is paid or at the time of application approval

Fees

Some lenders do not charge a fee for this feature, it may be a flat fee or based on a percentage of the loan amount (>0.20%)

Duration

90 days, if you need an extension most lenders will charge you another rate lock fee

Flexibility

Rate lock fees are generally non-refundable. If you decide to select a different fixed term and lock its rate during the process you may be charged another rate lock fee

Rate Changes

If the fixed interest rate drops during your rate lock period generally lenders apply the new lower rate to your loan, but do not refund your rate lock fee

Generally, the longer the fixed rate period you apply for, the more you stand to gain by locking your rate. Here are two scenarios and how much two borrowers look to save if interest rates on their loan product increase*:

Borrower 1

Ari is looking to purchase a property with a $1,000,000 30 year home loan under a 2 year fixed rate of 2.49%. He pays a flat rate lock fee of $500.

IncreaseRate2 Years InterestInterest IncreaseRate Lock Savings
0.00%2.49%48,712(500)
0.05%2.54%49,699987487
0.10%2.59%50,6861,9741,474
0.25%2.74%53,6504,9384,438
0.50%2.99%59,58610,87410,374
Rate Increase2 Years InterestInterest Increase
0.0% (2.49%)$48,712
Rate Lock Savings = –$500
0.05% (2.54%)$49,699$987
Rate Lock Savings = $487
0.10% (2.59%)$50,686$1,974
Rate Lock Savings = $1,474
0.25% (2.74%)$53,650$4,938
Rate Lock Savings = $4,438
0.50% (2.99%)$59,586$10,874
Rate Lock Savings = $10,374

Borrower 2

Genevieve is looking to refinance her current $2,000,000 20 year home loan to a 5 year fixed rate product with a rate of 3.29%. She pays a rate lock fee of 0.15% of the loan amount, or $3,000.

IncreaseRate2 Years InterestInterest IncreaseRate Lock Savings
0.00%3.29%298,784(3,000)
0.05%3.34%303,4684,6841,684
0.10%3.39%308,1569,3726,372
0.25%3.54%322,24323,45920,459
0.50%3.79%350,51851,73448,734
Rate Increase2 Years InterestInterest Increase
0.0% (3.29%)$298,784
Rate Lock Savings = –$3,000
0.05% (3.34%)$303,468$4,684
Rate Lock Savings = $1,684
0.10% (3.39%)$308,156$9,372
Rate Lock Savings = $6,372
0.25% (3.54%)$322,243$23,459
Rate Lock Savings = $20,459
0.50% (3.79%)$350,518$51,734
Rate Lock Savings = $48,734

While rate locks can provide you peace of mind and potentially save you significant sums of money, it’s also important to weigh this against the rate lock fee requested by your chosen lender. We’ve outlined some popular lenders and their current rate lock fees below:

LenderRate Lock Fee
CBA$500 ($750 after 30 Sep 2022)
Westpac0.10% of the loan amount
NAB0.15% of the loan amount
ANZ$750 per $1 million of lending
Me Bank$500
ING Australia$749
Adelaide BankNo fee (conditions apply)
St GeorgeMin. $500 or 0.15% of the loan amount
Bank of Queensland0.15% of the loan amount
Macquarie BankNo fee (conditions apply)
Unibank0.2% of the loan amount
Rate lock fees as of 01/02/2022

Variation between the fees charged and term and conditions on different lenders rate locks are significant. Whilst a rate lock on its own would never be the primary factor in deciding between lenders, in a market with quickly rising rates like we find ourselves now it is certainly an important factor.

Much like tailoring the right loan product to suit your current and future circumstances, your credit advisor can advise you of the nitty-gritty on a range of loan products so you can make an informed decision.