One of the first decisions you'll face when taking out a home loan is whether to go variable or fixed. Both have genuine advantages — and the right choice depends on your financial situation, risk tolerance, and what you expect rates to do.
Here's everything you need to know to make an informed call in 2026.
A variable rate loan moves up or down with the market — specifically, it tends to follow RBA (Reserve Bank of Australia) cash rate decisions. When the RBA cuts rates, your repayments usually drop within a month. When it raises them, your repayments go up.
A fixed rate loan locks 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 the RBA does. At the end of the fixed period, the loan automatically rolls to the lender's standard variable rate — which is often not their best rate.
Variable rates are by far the most common choice in Australia — roughly 80% of owner-occupier loans are variable. The main reason is flexibility. With a variable loan you can:
The trade-off is uncertainty. If the RBA raises rates — as it did aggressively in 2022–2023 — your repayments increase. On a $700,000 loan, a 1% rate increase adds roughly $430/month to your repayments. That's a meaningful hit to a household budget.
The offset account is often the key reason borrowers prefer variable. If you have $50,000 sitting in an offset account linked to a $600,000 loan, you're only paying interest on $550,000. At 6%, that saves $3,000/year in interest — without any additional repayments. The money is still accessible any time, unlike extra repayments on a fixed loan.
Fixed rates suit borrowers who want certainty — particularly first home buyers on a tight budget who can't absorb a repayment increase, or investors who want predictable cash flow on a rental property.
The appeal is simple: you know exactly what you'll pay for 1, 2, 3, or 5 years. If rates rise during that period, you're protected. If your budget is tight, that certainty has real value.
Fixed rates come with significant restrictions that many borrowers don't realise until it's too late:
⚠️ Watch out: Break costs on fixed loans can be enormous if rates have dropped since you fixed. Always get a written break cost estimate from your lender before making any decision to exit a fixed loan.
Many Australians choose a split loan — fixing part of the loan (say, 60–70%) for certainty, while keeping the rest variable to maintain flexibility and use an offset account. This gives you:
The split ratio is flexible — 50/50, 70/30, or whatever suits your goals. A broker can help you think through the right split based on your savings level and rate outlook.
Nobody can reliably predict where rates will go. What we can say:
Ultimately, the most important thing isn't which rate type you choose — it's which lender you go with. A lower variable rate beats a higher fixed rate every time, and the difference between lenders can be 0.5–1% on the same loan type.
| Loan ($600k, 30yr) | Rate | Monthly Repayment | Total Interest |
|---|---|---|---|
| Variable (competitive) | 5.89% | $3,551 | $678,360 |
| Variable (standard) | 6.49% | $3,789 | $764,040 |
| Fixed 2yr (competitive) | 5.79% | $3,513 | varies |
| Fixed 2yr (standard) | 6.79% | $3,912 | varies |
Illustrative rates only. Actual rates vary by lender, LVR, and borrower profile. Check our rates page for current indicative figures.
The gap between the best and worst lenders is often larger than the gap between variable and fixed. Choosing the right lender matters more than the rate type.
See current indicative variable and fixed rates side by side — free, no sign-up. Then talk to a broker to get your actual rate offer.
Yes, but you'll likely pay break costs. The amount depends on the remaining fixed term and how much rates have moved since you fixed. If rates have dropped since you fixed, the break cost could be very high. Always get a written break cost estimate from your lender before deciding.
Your loan automatically reverts to the lender's standard variable rate, which is often significantly higher than the best rates available. This is one of the best times to refinance. Start talking to a broker 3 months before your fixed period ends so you're not scrambling at the last minute.
Not really — it's just one loan with two portions. Your lender manages both under the same account. The main consideration is deciding the split ratio and which portion gets the offset account (always the variable portion). Your broker can handle the paperwork.
Rarely. Most lenders don't offer offset accounts on fixed rate portions. Some offer a "100% offset" on fixed rates as a premium product, but these often come with higher rates or fees. If an offset account is important to you (and it usually should be), a variable or split loan is the better structure.
That's the logic — but it's worth knowing that fixed rates already price in the market's expectation of future rate movements. If everyone expects rates to rise, fixed rates are already higher to compensate. The question isn't just "will rates rise" but "will they rise more than the fixed rate already assumes."