Your fix is rolling. Now what?

The framework

Every refix decision is the answer to four questions, in this order. Don't skip the order.

1. What are you protecting against? Cashflow shock, total interest paid, or both? Pick one.
2. What's your timeline? How long do you plan to keep this property without a major change (sale, refi, full repayment from a windfall)?
3. What's the current yield curve doing? Are short fixes cheaper than long fixes (inversion), more expensive (normal), or flat? The shape tells you what the market is pricing.
4. What does the household already have fixed? If you have $400k fixed for two more years and $300k rolling now, the new fix should solve the gap in your laddering, not replicate it.

The decision tree

Walk through this in order. The first "yes" you hit is your answer.

The four times "break and refix early" actually pays

Banks calculate break fees based on the gap between your locked rate and the rate they could earn lending the money today, multiplied by remaining time. When rates have risen since you fixed, the break fee is effectively zero. When rates have fallen, the break fee is meaningful, but sometimes still worth it.

1. You're selling within 6 months and breaking is cheaper than dragging. Get a written break-cost quote (banks must provide one within 5 working days). Compare to the rate gap × remaining time.
2. You're moving to a lower-rate lender with a cashback that exceeds the break fee. Common when refinancing for cashback. Math: cashback - (break fee + legal fees) = the net you're banking. Must be positive.
3. You have a structural change in income or family. New baby, redundancy, income drop. Sometimes the right move is to break, restructure to a longer interest-only or interest-and-principal split, and accept the break fee as the cost of the new structure.
4. Rates have fallen enough that the cumulative interest saving over the remaining fix period exceeds the break fee. Rare, but worth modelling once a year.

The two times "break early" looks tempting but isn't

1. "Rates fell 0.5% and my fix has 18 months left." The break fee is usually 0.5% × remaining time × balance. The arithmetic typically nets out to roughly zero, minus refinance fees. Wait it out.
2. "My neighbour got a better cashback." Their cashback was tied to a new full-loan refinance with a new lender, a fresh property valuation, and a new five-year fix at their rate. If you're getting a top-up from your existing lender, the cashback rules are different. Don't compare apples to oranges.

The split that most households should default to

Unless you have a strong reason to fix everything one way, the split below has handled most of the households we work with for the last 12 years:

1. 50% on the shortest available fix (6 or 12 months), captures rate cuts and gives you the option to refix lower.
2. 30% on the middle term (2 years), your stability layer.
3. 20% on the longer term (3-5 years), your insurance against a structural rate rise.

It's not the cheapest possible structure. It's the one with the smallest worst-case outcome. Most households would rather pay a small premium to remove the chance of a really bad year.

What to do this week

1. Pull your current fix end date out of your loan documents.
2. Note your current rate, your remaining balance, and the months remaining on the fix.
3. Walk the decision tree above and write down your answer.
4. Either action it (sign with your bank), or book the 15-min with Craig and bring the decision tree with you.