Longer fixed terms could reduce repayment shocks and improve market stability, says report
Australia’s mortgage market remains an outlier among advanced economies because borrowers carry most interest-rate risk and have limited access to long-term fixed products, a new report from the Consumer Policy Research Centre (CPRC) and Mortgage Stress Victoria (MSV) has claimed.
“Australian mortgages should be cheaper and fairer,” said Erin Turner, CPRC chief executive and a co-author of the report. “Right now, Australian borrowers carry too much of the risk relative to lenders.”
According to the report, Australia’s heavy reliance on variable-rate home loans leaves households unable to plan mortgage costs beyond the near term. Rate increases are typically passed through quickly, but rate cuts are not always reflected in borrowers’ repayments in the same way, because lenders retain discretion over pricing.
The report authors pointed to lending data for September 2024 showing fixed-rate loans accounted for only a small share (3%) of new lending by value, reinforcing the market’s variable-rate dominance.
Where borrowers do fix, they noted that terms were usually short. Most lenders cap fixed offers at five years, with only limited availability at seven or 10 years, often at materially higher rates than shorter fixed deals. When fixed terms end, borrowers commonly revert automatically to the lender’s variable rate, even if that rate is uncompetitive.
“Long-term fixed interest rate loans of 20 or 30 years are not on offer for Australians,” Turner (pictured right) said. “When Australians choose fixed-rate home loans, they typically lock in rates for two years or less.”
The report framed the case for 30-year fixed lending as both a consumer protection issue and a system design question. It added that long-term fixed mortgages are widely used overseas, but typically depend on structural supports that Australia has not built.
“Affordable fixed-rate home loans running between 10 to 50 years are common in Canada, Denmark, the United States of America (USA), South Korea and the European Union,” Turner pointed out. “With Federal Government planning and engagement, Australians could have cheaper long-term fixed interest products that leave them with certainty about what their housing costs will be over time.”
The report authors argued that if policymakers want 30-year fixed-rate options to be priced competitively in Australia, they must also address the funding side of bank balance sheets. They referenced Reserve Bank commentary suggesting that Australian banks rely heavily on domestic deposits and short-term wholesale funding, with securitisation and long-term debt playing a smaller role.
Beyond long-term fixed loans, the report called for more predictable variable products, including tracker-style pricing tied to disclosed benchmarks and fixed-payment variable loans that prioritise repayment certainty. It also recommended mechanisms that shift borrowers on poor-value legacy rates onto better deals, rather than relying on consumer switching alone.
Finally, it calls for consistent hardship standards across lender types, proposing a mandatory and enforceable Australian Mortgage Charter, backed by oversight and penalties.
“The Australian Banking Association’s Banking Code of Practice needs to be applied to all Australian lenders as a baseline minimum protection, and the Federal Government should explore further protections through a mandatory mortgage charter,” Turner said.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
