Key takeaways
- Fixed rates lock repayments for a set term — certainty but less flexibility.
- Variable rates move with the market — may fall or rise.
- Split loans combine both for a balance of certainty and flexibility.
Choosing between fixed and variable interest rates is one of the biggest mortgage decisions you will make. Each suits different risk appetites and life stages.
On this page
Fixed rate mortgages
Your interest rate stays the same for the fixed term (typically 1–5 years). Repayments are predictable. Break costs apply if you refinance or sell during the fixed period — can be substantial.
- Certainty when rates are rising
- Harder to make extra repayments (limits apply)
- Break fees if you exit early
Variable rate mortgages
Rate moves with the lender's standard variable and RBA cash rate changes. Often includes offset account and unlimited extra repayments. Repayments can rise unexpectedly.
- Flexibility for extra repayments
- Offset accounts often available
- Repayment amount can increase
Split loans
Fix a portion for certainty, leave the rest variable for flexibility. Useful when you are unsure which direction rates will move.
How to decide
Consider your budget buffer if rates rise 2–3%, how long you will keep the property, and whether you plan extra repayments. General information only — not personal financial advice.
Tip
General information only — not personal financial advice. Consider your own circumstances and read the Product Disclosure Statement (PDS) before purchasing any policy. Moneyhero may earn referral fees from some providers when you switch through us; this does not change how results are ordered. How we compare
Frequently asked questions
Quick answers for common questions about this topic.
Can I switch from fixed to variable mid-term?
Usually only by refinancing or paying break costs on the fixed portion. Check your loan contract for break fee calculation.
What happens when my fixed term ends?
The loan typically reverts to the lender's standard variable rate. Compare the revert rate against the market before it rolls.
Are fixed rates always higher than variable?
Not always — it depends on market expectations. Sometimes fixed rates are lower when lenders expect rates to fall.
Is a split loan worth it?
Split loans balance certainty and flexibility. A common split is 50/50 or 60/40 fixed to variable.