Honeymoon / introductory rates: revert risk

What an introductory rate is buying you

An introductory or honeymoon rate is a discount applied for a fixed initial period, commonly one to two years, after which the loan reverts to a standard variable rate. The discount is real, and for a borrower who intends to use the period deliberately it can be worth taking.

The risk is not the discount. It is that the revert rate is frequently a lender’s undiscounted standard variable, which can sit well above what the same lender offers new customers at that moment. You get a good rate for two years and an uncompetitive one for twenty-eight unless you act.

The number that matters is the revert margin

Ask what the loan reverts to, expressed as a margin over the cash rate or against the lender’s current new-customer rate, not just as today’s percentage. A 5.6% introductory rate reverting to standard variable tells you little on its own; the same loan reverting to standard variable less 0.70% is a materially different product.

Model the repayment at the revert rate before you sign, not at the introductory one. If the repayment at revert is uncomfortable, the loan is unaffordable and the honeymoon period is disguising that. Lenders assess you at the higher of the revert rate and the buffer for exactly this reason.

Why the current cycle sharpens this

With the cash rate at 4.35% after three increases during 2026 and the RBA holding unanimously in August, a loan written today reverts into an environment nobody can currently forecast with confidence. A borrower whose honeymoon ends in 2028 will revert to whatever standard variable is then, plus whatever margin the contract specifies.

The serviceability buffer of 3 percentage points is the regulatory protection here, and it is doing real work: your capacity is tested well above both the introductory rate and the current revert rate. Treat that assessment as information rather than an obstacle, because it is the closest thing you have to a stress test of your own budget.

The comparison rate helps, but not enough

The comparison rate does account for the revert, which is why an introductory loan often shows a comparison rate well above its headline. That makes it a genuinely useful signal on this product type.

Its limitation is the standard $150,000 over 25 years assumption. On an $800,000 loan over 30 years, the weighting between the discounted period and the revert period is different from the one the comparison rate models, so it understates how much of your total cost sits in the revert years. Use it to rank products, then model your own loan.

Using the honeymoon period properly

The strategy that makes these loans work is to keep paying the repayment you could afford at the revert rate throughout the discounted period, putting the difference into the loan or an offset. That converts the discount into principal reduction rather than lifestyle, and leaves you with a buffer and a smaller balance when the rate steps up.

Diarise the revert date when the loan settles, and start reviewing three months before it. Azure Home Loans can model the revert repayment against alternatives before you commit. This is general information for Australian readers rather than personal credit advice, and the specific product should be assessed against your own file.

FAQ

What is a honeymoon rate on a home loan?

A discounted interest rate applied for a fixed initial period, commonly one to two years, after which the loan reverts to a standard variable rate. The discount is genuine, but the revert rate is often the lender’s undiscounted standard variable, which can be well above what new customers are offered at that time.

What happens when the introductory rate ends?

Your rate steps up to the revert rate specified in the contract and your repayment rises accordingly, usually without any action on your part. Nothing prompts you beyond a notice. This is why the revert date is worth diarising at settlement and reviewing about three months out.

How do I find out what the loan reverts to?

Ask for it in writing before you sign, expressed as a margin against the lender’s standard variable rather than only as a percentage today. A rate that reverts to standard variable less a stated discount is a materially different product from one that reverts to full standard variable.

Are introductory rates a bad idea?

Not inherently. They work well for a borrower who keeps paying the higher repayment through the discounted period and puts the difference into the loan or an offset. They work badly for a borrower who budgets on the introductory repayment, because the step-up then arrives as a shock rather than a plan.

Does the comparison rate include the revert rate?

Yes, which is why introductory loans often show a comparison rate well above their headline, and it makes the comparison rate genuinely useful here. Its limitation is the standard $150,000 over 25 years basis, which weights the discounted and revert periods differently from a larger 30-year loan.

Can I refinance when the honeymoon ends?

Usually, and that is often the right move, but do not assume it. Refinancing depends on your circumstances and the lender’s policy at that future date, and if values have fallen your equity position may be weaker than at purchase. Plan for the revert repayment being affordable rather than relying on an exit.