Choosing between a fixed and variable rate home loan is one of the biggest decisions you’ll make when taking out a mortgage. Both have real advantages — the right choice depends on your situation, risk tolerance, and view on where interest rates are heading.
Fixed vs Variable — Key Differences at a Glance
| Fixed Rate | Variable Rate | |
|---|---|---|
| Interest rate | Locked for 1–5 years | Moves with RBA + lender |
| Repayments | ✅ Same every month | Changes with rate |
| Offset account | ❌ Usually not available | ✅ Usually available |
| Extra repayments | Limited (often $10k–$30k/yr) | ✅ Unlimited |
| Break costs | ❌ Can be very high | ✅ None |
| Current best rate (Apr 2026) | ~5.59% (1yr) | ~5.35% |
When to Fix Your Rate
- You need payment certainty — budgeting is tight and you can’t absorb rate rises
- You believe rates will rise — locking in now protects you
- You’re on a tight income — a single parent, sole income household, or anyone where cashflow stability matters
- You won’t sell or refinance — break costs can wipe out any savings if you exit early
When to Go Variable
- Rates are falling — you benefit immediately from every RBA cut (as is happening in 2025-26)
- You want an offset account — offset accounts are one of the most powerful tools to reduce interest, and they’re mostly only available on variable loans
- You plan to make extra repayments — paying off a $600k loan 5 years early saves $120k+ in interest
- You might sell or refinance — no break costs, full flexibility
The Split Loan Option
Many borrowers split their loan — for example 70% variable, 30% fixed. This gives you rate certainty on part of the debt while keeping flexibility on the rest. On a $600k loan, you might fix $200k for 2 years while keeping $400k variable with an offset account.
Current Rate Outlook — April 2026
The RBA cut rates in November 2024 and February 2025. Most economists expect 2–3 further cuts in 2025-26, which would bring the cash rate from 4.10% toward 3.35–3.60%. Variable rate borrowers stand to benefit from each cut. Fixed rates have already priced in some of this expectation.
Compare Your Options
See exact repayments for fixed vs variable at today’s rates.
Disclaimer: General information only. Not financial advice. Always consult a licensed professional before making financial decisions.