Fixed vs. variable rates: a general comparison

Fixed vs. variable rates: a general comparison

When choosing a home loan, one of the key decisions is whether to opt for a fixed rate, a variable rate, or a combination of both (known as a split loan). Each has potential advantages and considerations.

Variable rate loans

With a variable rate, your interest rate can move up or down over time in response to market conditions and the lender's decisions. This means your repayments may change.

• Potential benefits: Flexibility to make extra repayments without penalty, access to features like offset accounts and redraw, and the potential for rate decreases.
• Considerations: Repayments can increase if rates rise, which can make budgeting less predictable.

Fixed rate loans

A fixed rate locks in your interest rate for a set period (commonly one to five years). Your repayments stay the same during the fixed period, regardless of market changes.

• Potential benefits: Certainty of repayments during the fixed period, protection from rate increases.
• Considerations: May have limited flexibility for extra repayments, break costs may apply if you refinance or sell during the fixed period, and you won't benefit if variable rates decrease.

Split loans

A split loan divides your borrowing between fixed and variable portions. This can offer a balance of certainty and flexibility, though the ideal split depends on your individual circumstances.

There's no one-size-fits-all answer

The right choice depends on your financial situation, risk tolerance, and plans for the future. Our team can help you understand the differences and explore which option may suit your needs.