A fixed rate locks in your repayment for a set period regardless of RBA cash rate movements, giving certainty but less flexibility. A variable rate can move with the market and generally offers features like offset accounts and unlimited extra repayments. A split loan lets you combine both. There's no universally "right" answer — it depends on how much certainty you need versus how much flexibility you want to keep.
How Each Rate Type Works
| Factor | Fixed Rate | Variable Rate |
|---|---|---|
| Repayment certainty | Locked for the fixed term (commonly 1-5 years) | Can rise or fall with the market |
| Extra repayments | Often capped (e.g. $10,000-$30,000/year) | Usually unlimited |
| Offset account | Rarely available, or limited | Commonly available |
| Exiting early | May incur a break cost | Generally no penalty to refinance or pay out |
The Case for Fixing
Fixing suits borrowers who want budget certainty — knowing exactly what your repayment will be regardless of what the RBA does with the cash rate. It can also make sense if you believe rates are more likely to rise than fall over your fixing period. The trade-off is losing flexibility: most fixed loans cap extra repayments and don't offer an offset account, and exiting early (to sell, refinance, or make large extra repayments) can trigger a break cost.
The Case for Variable
Variable suits borrowers who prioritise flexibility — the ability to make unlimited extra repayments, use an offset account to reduce interest, and redraw funds without penalty. The trade-off is less certainty: your repayment can increase if rates rise. Over long periods, variable rates have also historically allowed borrowers to benefit when rates fall, without needing to refinance.
Splitting the Difference
A split loan divides your mortgage into a fixed portion and a variable portion in a ratio you choose (e.g. 50/50, 70/30). This lets you lock in certainty on part of your repayments while keeping an offset account and flexibility on the rest — a common middle ground for borrowers who don't want to commit fully to either option.
Frequently Asked Questions
Related reading: Refinancing in 2026 · Borrowing Power Explained · Repayment Calculator