Variable vs Fixed Loans: What’s right for me?
When choosing a home loan, it’s important to consider more than just the interest rate, fees, and charges. The first big decision is whether to go with a variable or fixed interest rate. Both options come with their own advantages and considerations, let’s break it down.
Variable Rate Loans – Go with the flow!
A variable rate loan means your interest rate can change over time based on the market movements (hello, Reserve Bank of Australia (RBA) decisions!). This can impact your repayments, either increasing or decreasing depending on rate changes.
✅ More flexibility—you can make unlimited extra repayments, potentially paying off your home loan sooner.
✅ Access to redraw & offset accounts—fancy ways to help save on interest and pay off your loan faster. Great for those with savings leftover after settlement and a bit of room to move in their budget. Learn more in this blog.
✅ Potential to save—If interest rates drop, so do your repayments, win!
✅ Easier refinancing—no break costs, making it simpler to switch lenders or restructure your loan.
❌ Rates can increase—if rates rise, so do your repayments.
❌ Less certainty—fluctuating rates can make it harder to predict long-term costs.
🔗 Check out our Variable Rate Loan Fact Sheet with more info.
Fixed Rate Loans – Set & Forget!
A fixed rate loan locks in your interest rate for a set period, (usually 1 to 5 years, you pick). Your repayments stay the same during the fixed period, providing certainty and stability, set it and forget it!
✅ Predictable repayments—great for budgeting and peace of mind, know what’s coming out each month.
✅ Protection from rate hikes—if interest rates rise, your repayments stay the same.
✅ Security & stability—ideal if you prefer knowing exactly what you’ll pay each month. Also ideal if you’ve used all of your savings when you purchased your home, helping you get back on top!
❌ Less flexibility—extra repayments are often limited, and offset accounts are rare.
❌ Break costs—if you exit your fixed loan early (e.g., refinancing or selling), you may face some hefty fees.
❌ Missing out on rate drops— you’re locked in, so you won’t see lower repayments
🔗 Check out our Fixed Rate Loan Fact Sheet with more info.
Fact: Most lenders allow you to split your loan—part fixed, part variable—so you can get the best of both worlds.
Still unsure? Ask yourself these questions…
Do I want flexibility? → A variable loan offers more freedom with repayments and features like redraws and offset accounts.
Do I prefer certainty? → A fixed loan helps you budget by locking in repayments.
Am I planning to refinance or sell soon? → A variable loan makes switching lenders easier with less fees.
Do I want a mix? → Consider a split loan, where part is fixed and part is variable.
Ultimately, it all depends on your financial goals, risk appetite, and your personal preferences.
Your Broker ,
Tara.
