What Is an Introductory Rate Loan?
An introductory rate loan offers a discounted interest rate for a set period at the start of the loan – typically six months to two years. Once that period expires, the rate switches to the lender’s standard ongoing rate, known as the revert rate. The revert rate is usually higher than the rates on competing products with no introductory offer.
As ASIC’s MoneySmart explains, the introductory rate is a short-term incentive designed to attract new borrowers. The financial case for the product depends entirely on what the revert rate is and how long you intend to hold the loan.
How the Calculator Works
Enter the following:
- Loan amount
- Introductory interest rate
- Introductory period (months)
- Revert interest rate (the ongoing rate after the intro period)
- Loan term
The calculator outputs your repayment during the introductory period, your repayment once the revert rate applies, and the total interest paid over the life of the loan. Running this comparison against a standard variable loan at the revert rate reveals whether the introductory period generates enough saving to justify the product.
The Revert Rate Problem
The financial risk with introductory loans is straightforward: borrowers choose the product because of the low opening rate, then remain on the higher revert rate through inertia. Lenders know this, and some structure the revert rate accordingly.
In 2024, approximately 670,000 Australian mortgage holders reached the end of introductory rate periods and reverted to higher ongoing rates – generating an estimated $2.41 billion in additional annual interest payments nationally. The lesson is consistent: the introductory period is the beginning of the loan’s cost story, not the whole story.
Introductory vs Standard Variable: A Direct Comparison
| Scenario | Loan Amount | Intro Rate | Intro Period | Revert Rate | Total Interest (30 yr) |
| Introductory loan | $600,000 | 5.49% | 12 months | 6.90% | ~$841,000 |
| Standard variable loan | $600,000 | 6.20% | N/A | 6.20% | ~$787,000 |
| Introductory loan | $600,000 | 5.49% | 24 months | 6.80% | ~$825,000 |
| Standard variable loan | $600,000 | 6.10% | N/A | 6.10% | ~$769,000 |
*Figures are indicative projections assuming rates remain constant.
**Actual outcomes depend on rate movements and repayment behaviour.
In both scenarios above, the standard variable loan costs less over the life of the loan despite a higher opening rate – because the revert rate on the introductory product more than offsets the initial saving once the introductory period ends.
When an Introductory Rate Can Work in Your Favour
There are genuine use cases where an introductory rate product makes sense:
- Short holding period: If you plan to sell the property or refinance within the introductory window, the revert rate is irrelevant
- Budget pressure in year one: First home buyers managing stamp duty, moving costs, and furnishing expenses may benefit from lower initial repayments as cashflow stabilises
- Deliberate refinance strategy: If you plan to refinance at the end of the introductory period regardless, the revert rate only matters if the refinance falls through
For first home buyers in Perth, the introductory period can provide a genuine breathing space in year one. The key discipline is treating the revert date as a firm trigger to reassess, not a footnote.
What to Watch For in the Product Terms
Not all introductory rate loans are identical. Key variables to check before committing:
- Whether the introductory rate is fixed or variable during the intro period – some products can move with market rates during the honeymoon window
- Exit fees or switching fees that apply if you refinance at or near the end of the intro period
- Whether extra repayments are permitted during the introductory period – some products restrict this
- The exact revert rate and whether it is described as a standard variable rate (which can be changed by the lender independently of the RBA cash rate)
Using This Calculator Alongside Other Tools
Run the introductory rate calculation against the Loan Comparison Calculator to evaluate a specific introductory product against standard alternatives. If you’re planning to refinance at the end of the intro period, the Mortgage Switching Calculator confirms whether the switch cost is covered by the interest saving.
For borrowers who want rate certainty without an introductory structure, the Fixed Rate Loans page explains how fixed products compare.
Frequently Asked Questions
1. Is the introductory rate fixed or variable?
Most introductory rates are discounted variable rates – they can move with the lender’s standard variable rate during the intro period, though they remain at a discount relative to it. Fixed introductory rates exist but are less common. Always check the product terms.
2. What happens if I want to refinance at the end of the intro period?
Most introductory rate products on variable loans do not attract break fees. However, some lenders charge switching or exit fees if you leave within a specified period. Review the product schedule before you sign.
3. Can I make extra repayments during the introductory period?
It depends on the product. Some introductory loans permit extra repayments; others restrict them as a condition of the discounted rate. Confirm with the lender before making additional payments.
4. How do I know if the revert rate is competitive?
Ask the lender for the current standard variable rate that the loan will revert to, then compare it against current market rates using the Comparison Rate Calculator. A wide gap signals the lender expects to recoup the introductory discount once the honeymoon ends.
5. Should I use an introductory rate loan for an investment property?
With caution. The revert rate affects the ongoing cost of carrying the investment, and the investment may not be sold or refinanced on a timetable that aligns with the intro period. Model the full-term cost before committing.
Get an Honest Assessment Before You Commit
Introductory rate products aren’t inherently bad – but they require the same scrutiny as any other loan feature. Central Lending Solutions compares introductory and standard products across a broad lender panel so Perth borrowers can see the true cost difference before making a decision. Call (08) 9201 8570, or explore our home loan refinance service if you’re already on a revert rate you’re not happy with.