Understanding home loans · Guide 02
Fixed vs
variable.
Understand what stays predictable, what can change and which features deserve a closer look.
The short answer
Certainty for a period.
Flexibility with change.
Fixed rate
A fixed rate stays agreed for a set fixed period, which is usually shorter than the total loan term. Product restrictions still matter.
Variable rate
A variable rate can move up or down. Repayments and available features depend on the lender and product.
The practical differences
| The question | Fixed rate | Variable rate |
|---|---|---|
| If rates change? | Your fixed rate stays unchanged during its agreed period. | Your lender may change the rate and repayments. |
| Extra repayments? | Limits may apply. Check the specific product. | Often more flexible, but check the actual terms. |
| Offset or redraw? | Availability may be limited or different. | Availability still depends on the product. |
| If I sell or refinance? | Break costs or early-repayment charges may apply. | Check discharge costs and any other fees. |
| At the end? | A new rate or loan arrangement applies. Plan ahead. | The variable rate continues subject to changes. |
The interactive example
See what a rate change could mean.
Compare illustrative monthly principal-and-interest repayments. Move the variable-rate scenario up or down.
Monthly repayment illustration
The scenario changes the variable rate to 7.25%. It is an illustration, not a forecast.
Repayments are calculated using monthly compounding over the entered full loan term. The rate-change comparison uses the same loan balance and term to isolate the rate effect; it is not a projection after a year. Fees are excluded. Fixed-rate certainty applies only to the agreed fixed period. All rates are hypothetical, not current offers or predictions.
A third possibility
One loan.
Two rate structures.
A split loan divides the borrowing into fixed and variable portions. For example, a hypothetical $500,000 loan could have $300,000 fixed and $200,000 variable.
The fixed portion has its own conditions. The variable portion has its own rate and features. A split does not make either set of conditions disappear.
Consider upcoming changes such as selling, making a large repayment or needing access to funds. Those plans belong in the conversation alongside the rate.
A few useful answers
Questions worth asking.
Does a fixed rate last for the whole mortgage?
Usually the fixed period is shorter than the overall loan term. Confirm both periods and the rate arrangement that follows.
Does a variable rate follow every Reserve Bank change?
The lender sets its variable rate. A policy-rate change does not guarantee an identical or immediate change to your loan.
Can I fix only part of the loan?
A split arrangement may be available, depending on the lender and product. Compare each portion and its fees.
Keep exploring
Clarity, one choice at a time.
Your next step
A little clarity.
A better conversation.
Bring your questions. We can talk through the numbers, features and considerations that matter in your situation.
Sources & further reading
Read the underlying guidance and check the current terms of any loan you are considering.
- ASIC MoneySmart: fixed vs variable interest rates (opens in a new tab) ↗
- ASIC MoneySmart: choosing a home loan (opens in a new tab) ↗
General educational information only. It does not consider your personal objectives, financial situation or needs. Examples are hypothetical, are not loan offers and do not assess eligibility. Lender criteria, product terms, fees and charges apply. Seek appropriate advice for your circumstances.