Variable vs Fixed Home Loans

Variable vs Fixed Home Loans

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Although it is impossible to predict what will happen to the economy and interest rates in the future, it can be useful to understand the benefits and drawbacks of fixed and variable home loans so you can choose the one that may be best for you.

There is no one-size-fits-all answer here. The perfect home loan for you will be determined by your circumstances and preferences.

If you’re debating between fixed and variable interest rates, here’s a quick review of the advantages and disadvantages of each.

Pros and cons of a fixed interest rate

A fixed-rate home loan locks in your interest rate for a set period, often one to five years. Knowing exactly what you need to pay can help with planning and budgeting.

However, one disadvantage of fixed-rate loans is that they can be rigid. Some institutions, for example, may prohibit you from making additional repayments or charge you a fee for doing so.

Similarly, if you find yourself suddenly loaded with cash and able to pay off your loan sooner, or if you need to break the fixed interest period for whatever reason, you may be required to pay a significant break charge.

The benefits and drawbacks of a variable interest rate

Interest rates on variable interest rate home loans can fluctuate depending on the official cash rate set by the Reserve Bank of Australia (RBA) and your lender’s discretion.

Benefits of variable interest rate

Drawbacks of variable interest rate

Many first-time home buyers prefer fixed rates because the fixed cost of the repayments gives their household financial stability. As it does not permit additional repayments and remains unchanged if the RBA lowers interest rates, it might not be the best choice for your specific mortgage needs.

To discover which type of house loan is appropriate for your financial position, it is always advisable to speak with a mortgage specialist.


Got questions? Find answers to some of the most commonly asked questions about our financial solutions, processes, and services to help you make informed decisions.

What is Lender’s Mortgage Insurance (LMI)?
How can making extra repayments benefit me?
What is Stamp Duty?
Which loans have a redraw option?


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