Key takeaways
- Fixed buys certainty of repayments; variable buys flexibility and features. Neither is “cheaper” by default.
- Fixed loans usually restrict extra repayments and offset, and can carry significant break costs if you exit early.
- A split loan — part fixed, part variable — lets you have some of each.
- The right choice depends on your plans (selling, renovating, refinancing) more than on rate forecasts.
Everyone wants to know which way rates are going. Nobody — including the banks — reliably knows. The good news: you don’t need a crystal ball to make a smart fixed-vs-variable decision. You need to be honest about your plans for the next few years.
How a variable rate works
Your rate moves with the market — down when rates fall, up when they rise. In exchange for that uncertainty you typically get the full feature set: unlimited extra repayments, offset accounts, redraw, and the freedom to refinance or sell at any time without penalty.
How a fixed rate works
Your rate — and repayment — is locked for a set term, usually one to five years. Budgeting is effortless and rate rises can’t touch you. The trade-offs: extra repayments are usually capped, offset is often unavailable or partial, and leaving early (selling, refinancing, or paying out the loan) can trigger break costs that run into the thousands.
Break costs are the fine print that matters most. If there’s a real chance you’ll sell, refinance or receive a lump sum during the fixed term, price that in before you lock. It’s the single most common fixed-rate regret we see.
The split loan: some of each
You don’t have to choose absolutely. A split loan fixes part of the balance and leaves the rest variable — certainty on most of the repayment, with an offset and unlimited extra repayments still working on the variable portion. For many households it’s the most livable structure.
How to decide
- Value certainty above all (tight budget, single income, new baby)? Fixing some or all makes sense.
- Expect to sell, renovate or refinance within a few years? Stay variable or fix only a short term.
- Save aggressively or hold a buffer? An offset on a variable (or split) loan puts that money to work.
- Tempted to fix because rates “must” rise? Fixed rates already price in the market’s expectations — you’re not getting ahead of the banks, you’re buying insurance. Buy it for certainty, not speculation.
Get a structure recommendation, not a sales pitch
Tell us your plans for the next five years and we’ll recommend fixed, variable or a split — with real numbers from 40+ lenders and the break-cost fine print explained up front.
Book your free game plan callFrequently asked questions
Can I make extra repayments on a fixed loan?
Usually only up to a capped amount per year — beyond that, fees or break costs can apply. If paying your loan down fast is the goal, keep at least part of it variable.
What happens when my fixed term ends?
The loan rolls onto the lender’s standard variable rate, which is often not competitive. Diarise it — the end of a fixed term is exactly the moment to review or refinance, and we’ll do that check for you free.
Is a split loan more expensive?
Not inherently — each portion gets its normal rate, and most lenders don’t charge extra for splitting. The design question is the ratio: how much certainty you want versus how much flexibility.
This guide is general information only and does not take your personal circumstances into account. It is not financial or credit advice. Government schemes, lender policies and rates change over time and eligibility criteria apply. Speak with us for advice tailored to your situation.