Choosing between fixed and variable is one of the first big decisions on any home loan. The right answer depends less on where rates are heading and more on how you like to manage money.
| Fixed | Variable | Split | |
|---|---|---|---|
| Repayment certainty | High | Low | Partial |
| Extra repayments | Usually limited | Usually unlimited | Unlimited on variable part |
| Offset account | Often not available | Usually available | On variable part |
| Cost to exit early | Break costs possible | Low | Break costs on fixed part |
When fixed suits
Fixing suits people who value certainty: first home buyers with a tight budget, or families who want to know exactly what's coming out each month. The trade-off is flexibility. If you sell or refinance during the fixed period, you may pay a break cost.
When variable suits
Variable loans suit people who want to pay extra, use an offset account, or may sell or refinance soon. Your repayments move with the market in both directions.
Split loans
A split loan divides your borrowing, for example 60% fixed and 40% variable with an offset. It's a common middle ground and can be adjusted when the fixed period ends.
When your fixed rate ends
Your loan usually rolls onto a higher revert rate. Start reviewing two to three months before. Our guide to what to do when your fixed rate ends explains the steps.
Questions to decide
- Could you cope if your repayments rose by several hundred dollars a month?
- Are you likely to sell, refinance or make large extra repayments in the next few years?
- Do you keep savings that could sit in an offset account?
If certainty matters most, lean fixed. If flexibility matters most, lean variable. If both matter, split.
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