Choosing between a fixed and variable rate home loan is one of the most common decisions borrowers face, and there's no universally "right" answer — it depends on your appetite for risk, your need for flexibility, and your financial goals.
How variable rate loans work
A variable rate can move up or down over the life of the loan, generally in response to changes in the cash rate and broader lending market conditions. This means your repayments can change over time. Variable loans often come with more flexible features, such as unlimited extra repayments, redraw facilities, and offset accounts.
How fixed rate loans work
A fixed rate locks in your interest rate for a set period — commonly one to five years — meaning your repayments stay the same regardless of what happens in the broader market during that period. This predictability can make budgeting easier, but fixed loans often have more restrictions, such as limits on extra repayments and potential break costs if you refinance or pay off the loan early during the fixed term.
Weighing up the trade-offs
| Consideration | Variable | Fixed |
|---|---|---|
| Repayment certainty | Can change over time | Locked in for the fixed period |
| Extra repayments | Usually unlimited | Often capped |
| Offset account access | Commonly available | Less commonly available |
| Exiting early | Generally flexible | May incur break costs |
Split loans: the middle ground
If you don't want to commit entirely to one or the other, a split loan lets you fix part of your balance while keeping the rest variable. This can offer some repayment certainty while still allowing flexibility on a portion of your loan.
The right choice depends on your personal risk tolerance, how long you plan to hold the property, and how much flexibility you need. A broker can talk through current market conditions and how different lenders structure their fixed and variable products.
VIP Finance operates as a Credit Representative (Number 565614) and holds ABN 59 323 956 021.
The information on this page is general in nature and doesn’t take into account your personal financial situation or objectives. It isn’t personal financial advice, and you should consider whether it’s appropriate for your circumstances before acting on it. Loan approval is always subject to the lender’s own credit assessment criteria.
