Fixed vs Variable Rate Home Loan
Repayment certainty versus flexibility — which is right for you in 2026.
The core trade-off
Every home loan decision comes back to a single trade-off: do you want certainty or flexibility?
Fixed rate
Your rate is locked for a set term — typically 1 to 5 years. Repayments don't change, making budgeting easier. If rates rise, you're protected. If rates fall, you miss out.
Variable rate
Your rate moves with market conditions. Repayments can go up or down. You get full flexibility — offset accounts, unlimited extra repayments, redraw — but no protection if rates rise.
Fixed vs variable — side by side
| Feature | Fixed rate | Variable rate |
|---|---|---|
| Rate certainty | ✓ Locked for term | ✗ Changes with RBA |
| Offset account | ✗ Usually not available | ✓ Available on many loans |
| Extra repayments | Limited — usually $10k–$20k/yr cap | ✓ Unlimited on most loans |
| Redraw facility | ✗ Usually not available | ✓ Available on most loans |
| Break fees | Yes — can be significant | No break fees |
| Benefit if rates fall | ✗ No — locked in | ✓ Yes — rate drops automatically |
| Protection if rates rise | ✓ Yes — rate is fixed | ✗ No — rate rises automatically |
The revert rate trap
When a fixed term ends, your loan automatically reverts to the lender's standard variable rate. This revert rate is almost always higher than their best advertised variable rate — sometimes significantly so.
What to do before your fixed term ends
- 1. Find out your revert rate (check your loan documents or call your lender)
- 2. Compare the revert rate against current variable rates on the market
- 3. Refinance or renegotiate 4–8 weeks before the fixed term expires
Split loans — getting both
A split loan divides your mortgage between a fixed and a variable portion. A common split is 60/40 — two-thirds fixed for certainty, one-third variable for flexibility.
The variable portion lets you make unlimited extra repayments, use an offset account, and benefit if rates fall. The fixed portion protects a larger share of your debt against rate rises. Most major lenders offer split loans; CommBank, Westpac, NAB, and Macquarie all support them.
Current variable rates to compare
All the loans in our comparison are variable rate. Current owner-occupied P&I rates start from:
- Pacific Mortgage Group — 5.59% p.a. (non-bank, no offset)
- Unloan — 5.69% p.a. (refinance only, loyalty discount)
- Up Home — 5.70% p.a. (free 100% offset, no fees)
- Macquarie — 5.84% p.a. (established bank, LVR tiers)
- Reduce Home Loans — 5.94% p.a. (non-bank, redraw only)
FAQs
What is the difference between a fixed and variable rate home loan?
A fixed rate home loan locks your interest rate for a set period — usually 1 to 5 years — so your repayments don't change. A variable rate loan moves with market conditions and the RBA cash rate, meaning your repayments can go up or down. Variable loans typically offer more flexibility (offset accounts, unlimited extra repayments, redraw), while fixed loans offer repayment certainty.
Is it better to fix or stay variable in 2026?
With the RBA cutting the cash rate in early 2025 and variable rates falling, the case for fixing is less clear in 2026. Variable rates from non-bank lenders currently sit around 5.59–5.94% p.a., which is competitive. Fixing makes sense if you value certainty and can accept the trade-off of losing offset access and extra repayment flexibility. Most borrowers are currently staying variable or using a split loan.
What happens at the end of a fixed rate period?
At the end of a fixed rate term, your loan automatically rolls onto the lender's standard variable rate — which is almost always higher than their best advertised variable rate. This is sometimes called the 'revert rate.' It's important to refinance or renegotiate before your fixed term expires to avoid the higher revert rate.
Can you make extra repayments on a fixed rate loan?
Usually only up to a cap — most lenders allow $10,000–$20,000 per year in extra repayments on fixed rate loans. Exceeding this limit triggers break fees. Variable rate loans generally allow unlimited extra repayments with no penalty.
What is a split loan?
A split loan divides your mortgage between a fixed and variable portion. For example, 60% fixed and 40% variable. The fixed portion gives you repayment certainty; the variable portion lets you make extra repayments, use an offset account, and benefit if rates fall. Most major lenders offer split loans.
Related
- Offset account explained — only available on variable loans
- Comparison rate explained — how to read the rate tables
- LVR explained — how your deposit size affects your rate
- Best Home Loans 2026 — top variable rate picks
- Compare all home loan rates
This page is for general information only and does not constitute financial advice. Rates verified May 2026. Confirm current rates and terms with each lender before applying.