Choosing between a fixed and variable rate is one of the most consequential decisions in your home loan — and there is no universally right answer. The right choice depends on your financial situation, risk tolerance, and what you expect from rates over the coming years.
A variable rate moves up and down in line with the lender's pricing decisions, which are largely influenced by the Reserve Bank of Australia's cash rate. When the RBA cuts rates, variable borrowers typically see their rate reduce. When rates rise, repayments increase.
The advantage of variable is flexibility. Most variable loans include an offset account and allow extra repayments without penalty. If you want to pay your loan off faster, make lump sum payments, or refinance without a break cost, variable is the appropriate structure.
A fixed rate is locked for a set period — typically 1, 2, 3 or 5 years. Your repayment stays the same regardless of what happens to market rates. This provides certainty for budgeting and protection against rate rises during the fixed term.
The trade-off is inflexibility. Fixed loans typically limit extra repayments (commonly capped at $10,000 per year), do not include a full offset account, and charge a break cost if you exit the loan before the fixed term ends. Break costs can be substantial if rates have fallen since you fixed.
A split loan divides your borrowing between a fixed and variable portion. For example, 60% fixed for rate certainty on the majority of the debt, with 40% variable to retain flexibility, offset account access and the ability to make extra repayments.
Split loans are popular among borrowers who want some certainty without being fully locked in. Lendology helps you determine the right split ratio based on your circumstances.
The fixed vs variable decision is always partly a view on where rates are heading — which is genuinely uncertain. Rather than trying to predict rates, we focus on your situation: how important is payment certainty? Do you have surplus cash to put in an offset account? Are you likely to need to refinance or sell in the fixed term?
These practical factors often point more clearly to the right answer than any rate prediction.
Yes, but you may incur a break cost depending on your remaining fixed term and current rate environment. We calculate the break cost before recommending a switch.
This depends on your specific financial situation and risk tolerance. We discuss both the market context and your personal circumstances before making a recommendation — we do not give a one-size-fits-all view on fixing.
Most fixed loans do not include a true offset account. Some lenders offer a partial offset on fixed rates. Variable loans almost universally include an offset account. This is a key consideration for borrowers with significant savings.
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