The basic trade-off
A variable rate moves with the market — typically in line with RBA cash rate changes, though not always by the same amount. Your repayment can go up or down over time. A fixed rate locks in your interest rate for a set period, usually one to five years, so your repayment stays the same regardless of what the RBA does during that time.
Fixed gives you certainty. Variable gives you flexibility. Neither is inherently better — they suit different situations.
Questions worth asking yourself
- How tight is your budget? If a repayment rise of a few hundred dollars a month would stretch you, the certainty of a fixed rate might be worth more to you than the chance of a lower variable rate.
- Do you expect to sell or refinance soon? Fixed loans often charge break costs if you leave early. That’s worth thinking about if your plans might change in the next few years.
- Do you want access to an offset account? This is a savings account linked to your loan that lowers your interest. Many fixed loans limit or don’t allow this, which matters if you rely on it.
- What’s your view on where rates are headed? Nobody can predict this reliably, including me. But how comfortable you are with not knowing is a fair thing to weigh up.
The middle option: splitting your loan
You don’t have to choose only one. A split loan puts part of your balance on a fixed rate and part on variable, in whatever split suits you. It’s a way to get some certainty, while keeping some flexibility and offset access on the variable part.
What I’d actually ask you
Rather than start with a rate comparison, I’d start with how long you plan to hold the property, how tight your budget is month to month, and whether certainty or flexibility matters more to you right now. The right structure follows from those answers — not from whichever rate happens to be lower this month.
Sources
- Moneysmart (ASIC), Choosing a home loan, viewed 9 October 2026, moneysmart.gov.au/home-loans/choosing-a-home-loan.