Guide · Rates & the market
Fixed vs Variable Home Loan Rates: How to Choose
There's no universally right answer here, and anyone who tells you otherwise is guessing at where rates go next. What there is: a clear set of trade-offs. Once you understand them, the choice usually makes itself.
When you take out a home loan you choose how the interest rate behaves. A variable rate moves up and down over time as the market and your lender change it. A fixed rate is locked for a set period, usually one to five years, then reverts to variable. Both are legitimate. The right one depends on how much certainty you want and how you plan to use the loan, not on trying to outguess the market.
The trade-off in one table
| Feature | Variable rate | Fixed rate |
|---|---|---|
| Repayment certainty | Changes with the market | Locked for the fixed term |
| Extra repayments | Usually unlimited | Often capped or limited |
| Offset account | Commonly available | Often not, or limited |
| Redraw | Usually flexible | May be restricted |
| Break costs | None to switch or repay | Can apply if you exit early |
| Best when | You want flexibility | You want budget certainty |
When a variable rate suits
- You want the flexibility to make extra repayments and pay the loan down faster.
- You want a full offset account to park savings against the loan. I break down how that works in the offset versus redraw guide.
- You might sell, refinance or renovate in the next few years and don't want to be tied down.
- You can absorb a rate rise in your budget if it comes.
When a fixed rate suits
- You want to know your exact repayment for the next few years, which helps if your budget is tight.
- You're on a single income, starting a family, or otherwise want certainty for a defined period.
- You're comfortable giving up some flexibility, like unlimited extra repayments or a full offset, in exchange for that certainty.
Fixed rates have a catch
If you break a fixed loan early, by selling, refinancing or repaying a big lump, the lender can charge a break cost. It's calculated on how rates have moved and can run into thousands. Fixing is a commitment for the term, so only lock in what you're confident you won't need to disturb.
The option people forget: split the loan
You don't have to pick one side. A split loan fixes part of your balance and leaves the rest variable. That gives you certainty on the fixed portion and flexibility on the variable portion, so you can still make extra repayments and use an offset against that part. It's a genuine middle ground, and for a lot of clients it's the sweet spot. There's no magic ratio, it comes down to how much of your repayment you want locked in.
Don't fix a rate to win a bet on the market. Fix it because certainty is worth more to your household than flexibility right now. That's a decision you can actually make well.
One more thing worth saying: I can't tell you where rates are going, and neither can the banks. What I can do is match the structure to your life, so you're not caught out either way. If you're weighing this up, it's a good thing to talk through. See how I work as your mortgage broker, or if you're switching loans, start with the refinancing guide.
Fixed, variable or split?
Tell me a bit about your plans and budget, and I'll walk you through which structure fits, with no jargon.
Frequently asked questions
Is it better to fix or go variable right now?
There's no answer that's right for everyone, and I'd be wary of anyone who claims there is. It comes down to how much certainty your household needs versus how much flexibility you want. If a locked repayment would help you sleep at night, fixing part or all of the loan can make sense regardless of where rates sit.
What is a split loan?
A split loan divides your balance into a fixed portion and a variable portion. You get repayment certainty on the fixed part and flexibility, like extra repayments and an offset, on the variable part. Many borrowers use it to get some of the benefit of both without fully committing to either.
What happens when my fixed rate ends?
Your loan usually reverts to the lender's variable rate, which can be higher than sharp new-customer pricing. It's a good moment to review your options, because you can often negotiate a better rate or refinance without break costs once the fixed term is over.
Important information
This information is general in nature and does not take your personal objectives, financial situation, or needs into account. It is not credit assistance or a recommendation to enter into any particular credit contract. Consider whether it is right for you and seek advice before acting. Lending is subject to a lender's eligibility and approval criteria. Terms, conditions, fees, and charges apply.
Greenwood Finance · ABN 23 671 049 693 · Credit Representative No. 551942.
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