Call 1300 633 667

Rate lock: how does it work?

Rate lock: how does it work?

  May 5, 2022

Rate lock: how does it work?

You’ve found the property. Your broker has helped you find the right loan with a competitive interest rate and all the features you want. You’ve completed the application and now you’re waiting for settlement. As the day comes your fixed rate has just jumped without notice. Your monthly repayments are suddenly higher than you anticipated and you’re locked into the loan for your fixed period.

It isn’t a scenario anyone would want and many people may not be aware that this can actually happen. Interest rates regularly change in response to market conditions, and the fineprint in your loan application likely specifies that the interest rate can change between application and settlement date. But there is a way to safeguard against this, and it is called a rate lock.

What is a rate lock?

A rate lock is an optional feature that may be available to applicants of fixed-rate home loans. It enables you to secure a rate, meaning even if interest rates rise, yours won’t. The lender usually charges a fee for this feature, but speak to us as this fee varies and some lenders may offer it for free.

The amount of time the rate lock lasts will also vary between lenders, for example 60 or 90 days. So if you have a longer settlement, MC Mortgage Solutions can discuss which lenders may be right for you.

How much are rate lock fees

The rate lock fee will vary depending on the lender but tends to range between free to around 0.2% of the loan amount. So for a $400,000 loan this amount could be around $800. The average is lower than this and tends to be around $750 for a $500,000 loan.

When should I consider a rate lock?

Rate locks tend to be most appealing when fixed interest rates are predicted to increase. For example, if some banks have started increasing their interest rates and others are predicted to follow suit. It also is usually more beneficial for a longer fixed term as there is more the borrower stands to save over the life of the loan. We can run the calculations for you to determine how much the interest rate would need to change to warrant the upfront rate lock fee.

It is important to keep in mind that if a lender lowers its interest rate and you have opted in for a rate lock, you are not necessarily guaranteed the lower rate. Each lender has a different policy around this and you may need to negotiate to see if you can cancel the rate lock to access the lower interest rate, which your we can do on your behalf.

Also, this fee may be non-refundable even if your application is unsuccessful. Speak with MC Mortgage Solutions to help with your application and understand where you stand with lenders.

If you have any questions, give MC Mortgage Solutions a call.

Have a question?

MC Mortgage Solutions would love the opportunity to discuss your circumstances with you. Whether you have found a house or are just in the planning stages it's never to early or late to make sure your finance is right for you.

Book an appointment
MC Mortgage Solutions

MC Mortgages was established with one clear goal: to be more than just brokers. With this compelling vision in mind, we have created a brokerage that is focused on looking beyond the customer’s initial request and taking a holistic approach to all their needs.

Recent Articles

  • Top 10 Tips for First-Time Home Buyers in Brisbane: 2025 Market Guide
    Top 10 Tips for First-Time Home Buyers in Brisbane: 2025 Market Guide

    Entering Brisbane’s property market as a first-time buyer in 2025 presents both exciting opportunities and unique challenges. According to the Real Estate Institute of Queensland (REIQ), Brisbane continues to show…

    More..
  • Is Now the Right Time to Refinance? Brisbane’s 2025 Market Outlook
    Is Now the Right Time to Refinance? Brisbane’s 2025 Market Outlook

    As we move through 2025, Brisbane’s property market continues to evolve, presenting unique opportunities for homeowners considering refinancing. With property values showing strong growth and potential interest rate changes ahead,…

    More..
  • Demystifying Mortgage Jargon: A Guide for Brisbane Homebuyers
    Demystifying Mortgage Jargon: A Guide for Brisbane Homebuyers

    Stepping into the world of home loans in Brisbane can feel like learning a new language. Whether you’re a first-time buyer or looking to refinance, understanding mortgage terminology is crucial…

    More..