The three options
When it comes to interest rates on your home loan, you've got three choices: fixed, variable, or a split of both.
Variable rate
Your rate moves with the market — up or down as the RBA changes the cash rate.
Pros: If rates drop, your repayments drop. More flexibility — offset accounts, redraw, extra repayments. More negotiating power with your lender.
Cons: If rates rise, so do your repayments. Less predictability for budgeting.
Variable suits people who have buffer in their budget, want flexibility, and are comfortable with some uncertainty.
Fixed rate
You lock in your rate for a set period — typically 1 to 5 years. Repayments stay exactly the same regardless of what the market does.
Pros: Predictable repayments, easier budgeting, protection if rates rise.
Cons: If rates fall, you don't benefit. Limited flexibility — most fixed loans restrict extra repayments and don't allow offset accounts. Break costs can be significant if you exit early.
Fixed suits people who want certainty, are on a tight budget, or are buying in a rising rate environment.
Split rate
Part of your loan is fixed, part is variable. You decide the split — 50/50, 70/30, whatever works.
Pros: Some certainty, some flexibility. The variable portion can usually have an offset account and allow extra repayments.
Cons: You won't feel the full benefit of either scenario — if rates drop you miss some of it, if rates rise you miss some of the protection.
Which is right for you?
There's no universal answer. It depends on your financial buffer, the current rate environment, how important flexibility is, and whether you're planning to sell or refinance soon. This is exactly what a broker helps you think through.
