Every lender in Australia offers fixed rate loans but only a few allow you to fix when building your home.

This is because fixed rate loans are more complex for banks to fund so they don’t allow you to draw down the loan in progress payments.

Some lenders have different sources of funding and are willing to offer fixed rate construction loans.

What features are available?

Construction loans with a fixed rate can still come with some of the benefits of traditional fixed rate loans.

  • Rate lock: Lock in your rate at the time of application to protect yourself from rate movements before council approves your plans and construction commences.
  • Progress payments: The loan can be drawn down in stages to match the required payments to your builder.
  • Progress inspections: Some lenders will send a valuer to assess the building during construction before releasing progress payments.
  • Fixed terms: 3 or 5 year fixed rate terms are available. Longer terms may be available on a case by case basis.
  • Interest only: Repayments can be minimised during construction and converted to principal and interest repayments for the remainder of the loan term.

In all cases, you must be using a licensed builder, your building must be approved by council and the lender must obtain a satisfactory on completion valuation.

Give us a call on 1300 889 743 or enquire online and one of our mortgage brokers will let you know which banks can help.

How much can I borrow?

  • First home buyer / Home loans: 95% of the land value plus the cost of construction.
  • Investor / Investment loans: 95% of the land value plus the cost of construction.
  • Renovation loans: 95% of the current house value plus demolition costs plus the cost of construction.
  • Discounts: Competitive professional package and basic loan discounts are available.

What if my bank doesn’t allow fixed building loans?

You can choose to build using a variable rate loan and then when construction is complete you can lodge a variation request to fix your interest rate.

The problem with this approach is that if interest rates change while you are building then you will need to accept the new rate.

The other option is to apply with another bank that does allow you to fix the rate during construction.

Talk to a construction loan specialist

Please call us on 1300 889 743 or enquire online to talk to a specialist mortgage broker who knows which lenders offer construction loans with fixed rates and to discuss which fixed term is more appropriate for you.

  • Huxham

    Are there fixed rate construction loans available for just renovations?

  • Hey Huxham,

    Yes, you can borrow up to 95% of the current house value plus demolition costs plus the cost of construction on a fixed rate construction loan.

  • alvarez

    I’m researching right now as I’ll be constructing soon. Can you tell me what documents I will be required to provide my bank to have the first set of funds transferred to my builder?

  • Hi alvarez,

    Prior to the first drawdown, you’ll be required to provide a signed building contract, a quantity surveyor report (depending on cost of project), council-approved plans and evidence of builders insurance. If you’d like to learn more about this as well as other construction loan docs, you can read up all about them here:

  • CA Dan

    Hey Home Loan Experts, I would like to learn more about progress payments so can you please explain a few things such as how to request one and some tips that I can benefit from?

  • Hey Dan,

    We have a page on construction progress payments, where you can find all the answers to your queries including some tips. Please have a look at it:

  • Ellie

    Any chance of getting to link an offset account with this loan?

  • You’re generally not allowed to link an offset account with a fixed rate loan. However, it can be done. Do note though that if you make too much extra repayments, you may have to pay significant exit fees / break fees.

  • wickerbottom

    I’d like to know what the lender would think if I’m paying my builder directly cash in hand. Will this be a problem?

  • Hi,
    If your builder is being paid cash for their work then no lender can approve a construction loan for you. They can only approve a loan based on the current value of your property. We recommend that you always sign a formal contract with your builder, ensure they have the correct insurances in place and follow all relevant state and federal legislation.

  • Roc G

    Fixing the interest rate on building loans sounds great but I have a question. Can you please help me understand what lenders consider if the fixed rate is higher than the variable rate? And what about the other way round?

  • Hi Roc
    As a general rule, if the current fixed rate is higher than the current variable rate, the money market may think that rates are likely to rise in the future. If the fixed rates are lower though, this indicates that the market believes rates may fall. Do note that it’s more complicated than that and nobody can predict the future. This does mean that fixing your interest rate is always somewhat of a gamble.