The short answer
Neither is better for everyone. A fixed rate gives you certain repayments for a set period but limits extra repayments and can carry break costs. A variable rate moves with the market but usually allows unlimited extra repayments, redraw and an offset account. Many borrowers split their loan to get some of each.
What are the pros and cons of a fixed rate?
A fixed rate locks your interest rate for typically one to five years.
- Certainty: your repayments do not change during the fixed period
- Protection if rates rise
- Limits on extra repayments, often capped each year
- Usually no offset account, or a limited one
- Break costs if you refinance, sell or repay early
What are the pros and cons of a variable rate?
- Repayments fall if rates fall, and rise if they rise
- Usually unlimited extra repayments and redraw
- Often available with a 100% offset account
- Easier and cheaper to refinance or sell
What is a split loan?
A split loan divides your borrowing into a fixed portion and a variable portion. You get some certainty on part of the loan while keeping flexibility and offset benefits on the rest. The split does not have to be 50/50.
What happens when a fixed rate ends?
The loan usually reverts to the lender's standard variable rate, which may be higher than the rates offered to new customers. Review your loan a few months before the fixed period ends.
Frequently asked questions
No one can reliably. Choose based on what you need, such as certainty for your budget or flexibility to pay down debt, rather than trying to time the market.
Related
General information only. It does not take into account your objectives, financial situation or needs. Lender criteria vary and approval is at the lender's discretion. Homestead is a mortgage broker, not a lender. Last updated 2026-11-04.