Variable vs Fixed: The Straight Answer

If you’ve ever sat at your kitchen table scrolling through home loan options while your eyes slowly glaze over… you’re not alone. For most Aussies, a home loan is the biggest financial leap we’ll ever take, and the most confusing.

One of the trickiest decisions? Choosing between a fixed or variable interest rate.

Now, I’m not here to overwhelm you with jargon or pretend there’s a one-size-fits-all solution. Let’s break it down with a clear, straightforward guide.

Variable Rates: The Go-With-the-Flow Option

The Upside

• Flexibility galore. Variable loans let you make extra repayments whenever you like with no punishments. Want to smash your loan faster? Go for it.

• Easy to switch. Spot a better deal? Moving to a new lender is simple because variable loans don’t come with punishing break costs.

• You win if rates fall.  When your bank drops rates, your repayments can shrink too. Great news for your wallet.

The Downside

• Rates can rise… and so can your repayments. Banks tweak rates based on funding costs, market competition, and a bunch of other factors you don’t see. When rates go up, so do your repayments.

• Cash flow whiplash. Because the rate moves around, it’s harder to budget long-term. You need a bit of wiggle room in your finances in case rates spike.

Fixed Rates: The Set-and-Forget Approach

The Upside

• Predictability. Lock in a rate and your repayments stay the same for 1–5 years. Great for budgeting and peace of mind.

• Protection from rate hikes. Rates going up? A fixed loan shields your wallet and gives you peace of mind.

The Downside

• Less freedom. Want to make extra repayments or clear your loan early? A fixed rate could make that expensive. Banks charge break fees and costly penalties to cover their own hedging costs.

• Fewer features. Offsets and redraws are usually limited or unavailable with a fixed account.

• You miss out on rate cuts. If rates drop after you’ve fixed, your repayments stay the same. No windfall for you.

Split Loans: A Nice Little Hedge

If choosing between fixed and variable feels like picking a favourite child, you don’t have to. A split loan lets you put part of your debt on a fixed rate and the rest on variable.

The fixed portion gives you certainty.
The variable portion gives you flexibility and access to features like offset accounts.

It’s like ordering half-and-half pizza: you don’t have to commit to just one flavour.

Whatever you choose, pay close attention to what rate your loan reverts to after the fixed period ends. Sometimes it jumps to a higher “standard variable rate”—and that can be a nasty surprise.

Here’s the Takeaway

A home loan is a long-term relationship. Your life will change, interest rates will shift, and the market will do whatever it likes.

So don’t set-and-forget forever. Revisit your loan every so often. Make sure the rate still works for you. And don’t be afraid to adjust, split, or switch when the time is right.

Choosing between fixed and variable doesn’t have to feel overwhelming. Break it down, think about what you need, and go with the option that helps you sleep best at night.

Natasha Tolevsky is a Specialist Medical Accountant. She provides expert guidance on tax strategies, building and protecting wealth . If you’re interested in discussing how we can help you,  please book a complimentary consultation by clicking here.

Disclaimer: This article contains general information only . It is not designed to be a substitute for professional advice and does not take into account your individual circumstances, so please check with us before implementing this strategy to make sure it is suitable