Fixed vs Variable Rate: Which Home Loan is Right for You?

One of the most common questions we get from home buyers and refinancers is: should I go fixed or variable? The honest answer is — it depends. Both have genuine advantages depending on your circumstances and what the market is doing. Here's how to think through it.

How Fixed Rate Loans Work

A fixed rate loan locks in your interest rate for a set period — typically 1, 2, 3 or 5 years. During that time, your repayments stay exactly the same regardless of what happens to official interest rates. At the end of the fixed period, the loan usually reverts to the lender's standard variable rate.

Pros:

• Certainty — you know exactly what you'll pay each month
• Protection if rates rise during the fixed period
• Easier to budget around a fixed repayment

Cons:

• If rates fall, you won't benefit
• Break costs can be significant if you want to exit early
• Limited extra repayments usually allowed
• Offset accounts often not available on fixed loans

How Variable Rate Loans Work

A variable rate loan moves up or down with the market — specifically with the Reserve Bank of Australia's cash rate decisions and lender movements. Your repayments change when rates change.

Pros:

• Benefit when rates fall
• Unlimited extra repayments on most loans
• Offset accounts and redraw typically available
• No break costs if you need to exit or refinance

Cons:

• Uncertainty — repayments can increase if rates rise
• Harder to budget with a changing repayment

What About a Split Loan?

A split loan divides your mortgage into two portions — part fixed, part variable. This is a popular middle-ground option that gives you some certainty while keeping the flexibility of a variable portion. For example, fixing 70% of your loan and keeping 30% variable lets you benefit if rates fall while maintaining budget certainty on the majority of your repayments.

Key Questions to Ask Yourself

• How important is repayment certainty to my budget and lifestyle?
• Do I plan to make extra repayments or pay the loan off faster?
• Am I planning to sell or refinance within the next few years?
• What's my view on where rates are heading?
• Do I want an offset account to reduce interest?

There's no universally right answer — the best choice depends on your specific financial situation, goals, and risk tolerance. This is exactly what we help you work through.

What Does the Market Look Like Right Now?

Interest rate decisions are influenced by inflation, economic conditions and the RBA's cash rate decisions. We stay across the market and can give you an up-to-date view of where fixed and variable rates are sitting — and what the current rate environment might mean for your decision. Book a free consultation and we'll walk you through it.