Revert Rate – What You Need To Know And How To Avoid It

Key Takeaways

• A revert rate is the default interest rate your mortgage switches to when your fixed or introductory period ends.
• Also known as a roll-to rate, it typically defaults to the lender’s Standard Variable Rate (SVR).
• Revert rates are generally much higher than promotional rates and exclude new customer discounts.
• Failing to act before your rate reverts can lead to a severe payment shock, commonly called the mortgage cliff.
• You can avoid this “loyalty tax” by repricing with your current lender or refinancing to a new bank.

What Is A Revert Rate?

A revert rate, also known as a roll-to rate, is the interest rate your home loan automatically switches to after your fixed-rate or introductory period ends.

Typically, lenders move borrowers to their Standard Variable Rate (SVR), which is an uncompetitive benchmark rate that excludes promotional discounts offered to new customers.

How Does A Revert Rate Work?

The trigger mechanism for a revert rate is the expiration of your initial loan term. This is usually a 1-to-5-year fixed-rate period or a 1-year honeymoon rate.

Once your fixed or introductory term expires, your home loan automatically rolls over to the variable rate. Because this new rate is heavily influenced by the Reserve Bank of Australia (RBA) cash rate and lender margins, it is almost always significantly higher than your initial discounted rate.

The Financial Impact: Beware The Mortgage Cliff

When a low fixed rate expires and jumps to a much higher variable rate, borrowers often face a sudden, drastic increase in their monthly repayments. This financial shock is widely known as the mortgage cliff.

To illustrate how a 0.5% to 4.0% rate jump impacts your borrowing costs, review the comparison table below based on a typical 30-year loan term.

Repayment Shock Example ($750,000 Loan Balance)

Note: Calculations are approximate. Use our Interest Rate Calculator to determine your exact repayment amount.

Case Study: Beating the Loyalty Tax

According to our mortgage brokers, taking proactive action is the best way to bypass the lender’s loyalty tax. For example, our client John had a split home loan locked at 2.09% in 2021. Two years later, his fixed term ended, and his loan was set to revert to the bank’s uncompetitive 5.09% SVR.

Instead of doing nothing, John worked with us to refinance his home loan. We secured him a lower variable rate of 4.74% with a new lender, decreasing his monthly repayments by $125 and bypassing the standard roll-to rate entirely.

What Are Your Options When Your Fixed Rate Ends?

You have several strategic choices to make before your introductory rate expires. Here is a breakdown of your core options:

Do Nothing (Revert to SVR)

If you take no action, your loan automatically reverts to the lender’s standard variable rate. Consequently, you will likely pay a “loyalty tax”—meaning you pay more than new customers who are receiving active discounts.

Reprice Your Current Loan

Repricing involves negotiating a lower interest rate with your existing lender. If refinancing is not possible due to low equity or changing serviceability, your broker can approach your current bank to request a targeted discount to keep your business.

Refinance to a New Lender

Refinancing means moving your mortgage to a completely different bank to secure a lower rate. In contrast to remaining on an SVR, refinancing often gives you access to highly competitive rates and occasional cashback offers.

Re-fix Your Interest Rate

If you prefer a predictable monthly repayment system, locking in a new fixed-rate term is a reliable option. However, lenders will evaluate the current market, meaning your new fixed rate will reflect today’s pricing, not your previous historically low rate.

5 Ways To Prepare Before Your Rate Reverts

To ensure you are fully prepared for the end of your fixed term, follow these essential steps:

Know your revert rate

Before your fixed-rate term ends, find out exactly what your new SVR will be. This clarifies your upcoming financial obligations.

Evaluate your finances

Calculate your new monthly repayment. If the higher rate stresses your budget, you must immediately consider refinancing or repricing.

Consider your options

Weigh the pros and cons of re-fixing, repricing, or moving to a new lender. Assess long-term flexibility versus short-term savings.

Plan for the future

If you choose to stay on a variable rate, build a financial buffer. Variable rates fluctuate with the RBA cash rate, so prepare for potential future rate hikes.

Reach out to the experts

Engage a specialist mortgage broker well before your rate expires. Brokers have the negotiation power to access heavily discounted rates that are generally unavailable directly to consumers.

Need Help Beating The Revert Rate?

Are you approaching the edge of the mortgage cliff? Our award-winning mortgage brokers know exactly how to negotiate with lenders to eliminate your loyalty tax.

As of the time of writing, we have lenders on our panel offering incredibly competitive rates and cashback offers of up to $5,000 for eligible refinancers. Our dedicated team will help you assess your borrowing power and scour the market for the best possible deal.

Call us on 1300 889 743 or complete our free online assessment form today, and we’ll help you secure a better rate!