Fixed vs Variable · Free Guide · Clear Path Home Loan

Fixed Or Variable? Pick Right.

With the RBA cutting rates through 2026, the fixed versus variable decision has never been more discussed. Here is a clear, jargon-free breakdown of each option and how to think about it for your situation.

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Last reviewed: April 2026

5.24%

Indicative best 2-year fixed rate (April 2026)

5.75%

Indicative average variable rate (April 2026)

4.10%

RBA cash rate after 3 cuts in 2026

Fixed rate — certainty above all

Your rate and repayments stay the same for the fixed period regardless of what happens to interest rates. This makes budgeting easier and protects you if rates rise. The trade-off: if rates fall, you are stuck paying the higher fixed rate. Breaking a fixed loan early usually involves significant break fees.

Variable rate — flexibility and potential savings

Your rate moves with the market. When the RBA cuts, your repayments can fall. Variable loans also typically allow unlimited extra repayments and come with offset accounts — which can save you significantly more than a lower rate alone.

Split loans — best of both worlds

Many borrowers split their loan — fixing a portion for certainty while keeping the rest variable for flexibility. A common split is 50/50. This gives you rate certainty on part of your loan while retaining offset and extra repayment benefits on the variable portion.

The offset account advantage

Variable loans almost always come with offset accounts. Money in your offset reduces the interest you pay dollar for dollar. $100,000 in offset on a $600,000 loan means you only pay interest on $500,000. Over 30 years, this can save tens of thousands.

The 2026 rate environment

With the RBA cutting rates three times in 2026 and further cuts anticipated, many borrowers are favouring variable rates to capture ongoing reductions. Fixed rates are set based on where markets expect rates to be — they already price in some future cuts.

What people get wrong

Common mistakes to avoid

❌

Fixing without understanding break costs

Breaking a fixed loan early involves break costs that can be substantial — potentially thousands of dollars. Always get a written break cost estimate before refinancing or selling during a fixed period.

❌

Letting a fixed term expire without reviewing

When your fixed term ends, your loan automatically reverts to the lender's standard variable rate — which is often not competitive. Set a calendar reminder 3 months before your fixed term ends and review your options.

❌

Choosing fixed purely because rates might fall further

Nobody knows with certainty where rates will go. If the certainty of a fixed repayment lets you budget and sleep better, that has real value — even if variable rates fall further.

❌

Thinking a split loan is complicated

A split loan is simpler than it sounds. One loan, two portions. Your offset attaches to the variable portion. Your lender handles everything administratively. Most borrowers find it very manageable.

💡 The specialist advantage

The right fixed versus variable decision depends on your loan size, income stability, budget flexibility and risk tolerance. A specialist can model both scenarios for your specific numbers — showing you exactly what each option means in dollar terms over your likely loan period. This is one of the most valuable conversations you can have before applying.

Common questions

Frequently asked questions

Yes — but break costs can be substantial depending on how much rates have moved since you fixed. Always get a written break cost estimate from your lender before making this decision.

At the end of your fixed term your loan automatically reverts to the standard variable rate — often not the most competitive rate. This is the ideal time to refinance or renegotiate. Set a reminder 3 months before your term ends.

Most fixed loans allow limited extra repayments — typically up to $10,000–$30,000 per year. Going over this limit may trigger break fees. Variable loans almost always allow unlimited extra repayments at no cost.

With the RBA cutting rates through 2026 and further cuts anticipated, many borrowers are currently favouring variable to capture ongoing rate reductions. The right answer depends entirely on your personal situation — a specialist can model both scenarios with your actual numbers.

The comparison rate includes the interest rate plus most fees, giving you the true cost of a loan. The headline rate is often lower than the comparison rate. Always compare loans using comparison rates, not headline rates.

Want to go deeper?

Read the full in-depth guide →

Our comprehensive fixed vs variable guide covers break costs, split loan strategies, offset account modelling, and rate scenarios in full detail.

Read the comprehensive guide →

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