Fixed or variable? It's the question almost every borrower wrestles with — and the honest answer is that neither is "better." They're different tools for different situations. Here's how to think about it clearly.
Variable rate — flexibility
A variable rate moves up and down with the market. The upsides are real: you usually get an offset account, you can make unlimited extra repayments without penalty, and refinancing or selling is simple. The catch is uncertainty — if rates rise, your repayment rises with them.
- Best when: you value flexibility, want an offset, plan to make extra repayments, or might sell/refinance.
- Watch out for: repayment increases if rates climb — make sure you have buffer.
Fixed rate — certainty
A fixed rate locks your interest rate (and repayment) for a set term, usually 1 to 5 years. It's peace of mind: you know exactly what you'll pay, which is great for tight budgets. The trade-offs are break costs if you exit early, usually limited extra repayments, and often no full offset account.
- Best when: you want certainty, have a tight budget, and are unlikely to move or refinance during the term.
- Watch out for: break costs if your plans change; less flexibility to pay it down fast.
Fixing isn't about "beating" the bank on rate — it's about buying certainty. The question is how much that certainty is worth to you right now.
The middle ground: a split loan
You don't have to choose all-or-nothing. A split loan fixes part of your loan and keeps part variable — say 50/50. You get some repayment certainty and keep an offset plus extra-repayment flexibility on the variable portion. For a lot of clients, this is the sweet spot.
Quick guide
Want certainty above all? Lean fixed.
Want flexibility, offset, extra repayments? Lean variable.
Want a bit of both? Split it.
How I'd help you decide
The right answer depends on your budget, how long you'll hold the loan, whether you'll make extra repayments, and how much rate movement you can absorb. I'll model the options against your numbers — including a split — and show you the trade-offs in dollars, not jargon. You can also try the repayments calculator to see how different rates change your repayment.