Fixed rates on investment loans now sit in a very different position than they did two years ago.
The question most Brisbane property investors are asking is whether to lock in a rate now, and if so, for how long. The answer depends on what you need the loan to do over the next few years, not just what the rate looks like today.
Why Fixed Rate Terms Matter More on Investment Loans
Fixed rate terms determine how long your repayments and deductions stay predictable. On an investment property, that stability directly affects your cashflow and your ability to claim interest as a tax deduction.
Consider a buyer who settles on a rental property in Hamilton. They fix the rate for three years. Eighteen months in, vacancy rates lift and they need to lower the rent to attract tenants. Because the loan repayment is locked, they know exactly how much they need to cover each month. That certainty makes it easier to hold the property through a softer patch without panic decisions.
The flip side is that fixed rates come with restrictions. Most lenders cap extra repayments at $10,000 to $30,000 per year during the fixed period. If you sell the property or want to refinance early, break costs can apply. Those costs are calculated based on the difference between your fixed rate and the rate the lender can now earn on the money over the remaining fixed term. If rates have dropped, the break cost can be substantial.
Should You Split the Loan Between Fixed and Variable?
Splitting the loan gives you partial rate certainty and partial flexibility. It is not a compromise, it is a structure that aligns with how most investors actually use their loans.
In our experience, investors who split their loan between fixed and variable portions tend to preserve more options. The variable portion allows you to make extra repayments, redraw funds if needed, and refinance or sell without triggering break costs on the full balance. The fixed portion locks in part of your repayment and deduction, which is useful if you are holding the property long term or if rental income is tight.
A common structure is 50/50, but the split can be adjusted to suit your situation. If you expect to sell within a few years or you are planning to use equity for another purchase, a smaller fixed portion gives you room to move. If cashflow is the priority and you want certainty on most of your repayment, you might fix 70 or 80 per cent and leave the rest variable.
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How Long Should You Fix an Investment Loan?
One, two, three and five year fixed terms are all available, but the rate and the flexibility change with the term length. Shorter terms usually come with lower rates and lower break costs if you exit early. Longer terms lock in certainty but reduce your ability to respond to changes in your circumstances or the market.
For Brisbane investors, we regularly see two and three year fixed terms work well. They cover a realistic holding period without locking you in so long that the loan becomes hard to adjust. If you are buying in an area like Paddington or New Farm where rental demand is strong and you plan to hold the property for at least five years, a three year fix gives you breathing room. If you are building a portfolio and expect to refinance or buy again within two years, a one or two year term keeps your options open.
Five year fixed terms are less common on investment loans because most investors need flexibility before that time is up. The exception is when you are certain you will hold the property and you want to lock in a rate that you believe will not be available again in the near term.
Fixed Rate Investment Loans and the New Negative Gearing Rules
From 1 July 2027, new negative gearing restrictions apply to residential investment properties acquired on or after 7:30pm AEST on 12 May 2026. If you buy an established dwelling after that date, rental losses can only be offset against other residential rental income or carried forward. They cannot be offset against wages or salary.
Properties acquired before that date and time are grandfathered under the old rules. Eligible new builds remain fully negatively geared even after 1 July 2027.
If you are settling on an established rental property between now and 30 June 2027 and it was purchased after 12 May 2026, you can still offset losses against your other income until 30 June 2027. After that, the quarantine applies.
This changes how you think about fixed rate terms. If your strategy relies on offsetting rental losses against salary to reduce taxable income, and you are buying an established property now, you have until 30 June 2027 to make use of that deduction. Fixing the rate for a term that ends after mid 2027 means your repayments will stay the same, but the tax treatment of the loss will change partway through the fixed period. That does not make fixing a poor choice, but it does mean you need to model the cashflow impact on both sides of that date.
If you are buying a new build, the rules do not change. You can still offset losses in the usual way, and fixing a rate for three or five years remains straightforward.
What Happens When Your Fixed Term Ends
When the fixed period finishes, the loan automatically rolls to the lender's standard variable rate unless you do something. That variable rate is almost always higher than the rate you could negotiate by refinancing or by calling your current lender and asking for a discount.
Most lenders send a notification 30 to 60 days before the fixed term ends. That is your window to review the loan. You can fix again, switch to variable, split the loan differently, or refinance to another lender with a lower rate.
We regularly see investors miss this window and end up on revert rates for months before they realise. The difference can be 0.50 to 1.00 per cent or more, which on a loan of $500,000 is $2,500 to $5,000 in extra interest per year.
If your fixed term is ending soon, book in a loan health check at least 60 days before the expiry date. That gives you time to compare options, submit an application if needed, and avoid rolling onto a higher rate by default.
Interest Only Loans and Fixed Rate Terms
Many investors choose interest only repayments to maximise their tax deductions and keep their cashflow low. You can fix an interest only loan, but the term options are usually shorter. Most lenders will fix an interest only period for one, two or three years. Five year fixed interest only terms are less common.
The interest only period and the fixed rate term do not need to match. You might have a five year interest only period but only fix the rate for two years. At the end of the two years, you can refix, switch to variable, or refinance while the interest only period continues.
If the interest only period expires before the fixed term, the loan will automatically switch to principal and interest repayments. That increases the repayment amount, which can affect cashflow and your ability to service other debt. If you want to extend the interest only period, you need to apply before it expires. Lenders assess interest only extensions based on your current financial position, not the position when you first applied.
If you are planning to hold the property long term and you want to fix the rate, make sure the interest only period is long enough to cover the fixed term or have a plan to extend it before the term ends.
Using Equity to Buy Another Property During a Fixed Term
If you have equity in an investment property and you want to use it to buy another property, you will need to refinance or top up the loan. If the loan is fixed, refinancing will likely trigger break costs. Topping up may be allowed depending on the lender, but most lenders do not allow it during a fixed term.
This is where splitting the loan makes a practical difference. If the variable portion is large enough to cover the equity you need to release, you can leverage equity without touching the fixed portion and without paying break costs.
If you are building a portfolio and expect to buy again within the next few years, either keep the full loan variable or fix only a portion of it. That way you preserve access to your equity without being locked into a structure that costs you thousands to unwind.
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Frequently Asked Questions
Can I fix an interest only investment loan?
Yes, you can fix an interest only investment loan. Most lenders offer one, two or three year fixed terms on interest only loans. The interest only period and the fixed rate term do not need to match.
What are break costs on a fixed rate investment loan?
Break costs apply if you exit a fixed rate loan early by refinancing, selling the property or paying out the loan. They are calculated based on the difference between your fixed rate and the rate the lender can now earn on the money over the remaining term.
Should I fix my investment loan if I plan to sell in two years?
If you plan to sell within two years, either keep the loan variable or fix for a shorter term to reduce potential break costs. Fixing for three or five years when you expect to exit early can result in significant break costs if rates have dropped.
How does splitting a loan between fixed and variable work?
Splitting a loan means dividing the balance into two portions, one fixed and one variable. Each portion operates independently with its own rate, repayment and features. The split allows partial rate certainty while preserving flexibility on the variable portion.
What happens when my fixed rate term ends?
When the fixed term ends, your loan automatically rolls to the lender's standard variable rate unless you refix, negotiate a discount or refinance. The revert rate is usually higher than the rate available to new borrowers or through refinancing.
