A first home buyer in the ACT should decide how much of the loan to fix and whether an offset account will be used before applying, because the two features interact. This article sets out how each operates, the common errors in combining them, and the ACT measures that affect loan structure.
How Does a Fixed Interest Rate Work for a First Home Buyer?
A fixed interest rate holds the rate on all or part of a loan at an agreed level for a set term, so repayments on that portion do not change during the fixed period. The principal trade-off is reduced flexibility.
Depending on the lender, a fixed portion may carry break costs if the loan is repaid or refinanced early, may cap additional repayments, and may not be linked to an offset account or redraw facility. These terms differ between lenders and should be confirmed in the product disclosure documents before a home loan is selected. A common error is fixing the entire loan without checking these conditions.
How Does an Offset Account Work?
An offset account is a transaction account linked to a home loan. Its balance is subtracted from the loan balance when interest is calculated, which reduces interest charged while the funds remain available for use.
The benefit depends on the balance held and the time it is held. Some lenders attach an annual fee or a different interest rate to loans with an offset facility, and the facility may apply only to the variable portion of a split loan. A buyer who regularly draws the balance down to near zero will obtain little reduction in interest.
ACT Duty Concession and the 5% Deposit Scheme: Effects on Loan Structure
From 1 July 2026, eligible ACT buyers pay no conveyance duty on a home or vacant residential land, and the previous property price cap and income threshold have been removed. Buyers and their domestic partners must not have held an interest in any property in the five years before the transaction date, and at least one buyer must live in the home as a principal place of residence for at least one year.
The Australian Government 5% Deposit Scheme applies an ACT price cap of $1,000,000. It has no income cap, and eligible first home buyers can purchase with a 5% deposit without paying lenders mortgage insurance. Applications are made only through a participating lender. Available loan features, including fixed rates and offset accounts, vary by lender, so confirm them with the participating lender.
The saving on conveyance duty can alter how much cash is available to hold in an offset account. Buyers should also confirm their borrowing capacity before relying on any figure.
Common Mistake: Placing All Savings in the Loan Without an Offset Plan
A split loan with an offset account linked to the variable portion lets a buyer keep savings accessible while reducing interest on that portion. The trade-off is that the fixed portion generally receives no such benefit.
As an illustrative example, consider a buyer with a $600,000 loan over 30 years. The illustrative rate used throughout is 6.75% per annum, and it is applied to both portions for comparison only. The buyer fixes $300,000 and leaves $300,000 variable with an offset account attached. Principal and interest repayments on the whole loan at that rate are approximately $3,892 per month, or about $1,946 per month on each half.
The buyer holds $40,000 of savings in the offset account. Interest on the variable portion is then calculated on $260,000 rather than $300,000. At the illustrative rate, that is $2,700 less interest over a year, provided the $40,000 remains in the account for the full year. The buyer retains access to the funds for emergencies, and the fixed portion provides certainty on half of the repayments.
The cost of this structure is that additional repayments on the fixed half may be limited or attract fees, and any offset fee reduces the saving. Actual rates for each portion will differ, so results will vary.
Fixed Rate Expiry: Planning for the End of the Term
When a fixed term ends, the loan generally moves to a variable rate set by the lender unless a new rate is selected. Borrowers should review their options before the expiry date rather than after it.
A review at that stage can consider a new fixed term, a variable rate with an offset account, or a move to another lender. Further information is available on our fixed rate expiry page. Break costs generally apply only to early exit, so the timing of any change should be confirmed with the lender in writing.
Matching the Structure to the First Home Buyer's Circumstances
A buyer who expects stable income and wishes to budget precisely may favour a larger fixed portion. A buyer who expects to accumulate savings or make additional repayments may favour a variable portion with an offset account. Neither approach is suitable for every borrower, and each carries the trade-offs noted above.
Our first home buyers page provides further information on the schemes that may apply. Call one of our team or book an appointment at a time that works for you, and we will assess your circumstances and set out suitable loan structures for your consideration.
Frequently Asked Questions
Can a fixed rate loan have an offset account?
This depends on the lender and product. Some fixed portions are not linked to an offset account, so the facility may apply only to a variable portion of a split loan.
What is the main risk of fixing an entire home loan?
Reduced flexibility is the main risk. Depending on the lender, break costs and limits on additional repayments may apply.
Do ACT first home buyers pay conveyance duty?
From 1 July 2026, eligible ACT buyers pay no conveyance duty on a home or vacant residential land. Buyers must meet the property ownership and occupancy conditions.
Does the 5% Deposit Scheme apply in the ACT?
Yes. The ACT price cap is $1,000,000, and applications are made only through a participating lender. Available loan features vary by lender and should be confirmed with that lender.
