Fixed vs Variable Home Loans: Which Is Right for You?

One of the first decisions you'll make when taking out a home loan is whether to choose a fixed or variable interest rate. Both have genuine advantages — and the right choice depends entirely on your financial situation, goals, and risk tolerance. Here's a clear breakdown of what each means and when each makes sense.

What is a fixed rate home loan?

A fixed rate loan locks in your interest rate for a set period — typically 1 to 5 years. During that time, your repayments stay the same regardless of what the RBA does with the cash rate. This predictability is valuable: you know exactly what your mortgage costs each month, making budgeting straightforward.

At the end of the fixed period, your loan typically "rolls over" to the lender's standard variable rate, or you can fix it again. This rollover moment is critical — it's when you should call your broker to review your options, since the standard variable rate is often far from competitive.

What is a variable rate home loan?

A variable rate loan changes when market rates move. When the RBA cuts the cash rate, your lender may pass on some (or all) of that reduction. When the RBA hikes, your repayments increase. Variable loans typically offer more flexibility: unlimited extra repayments, redraw facilities, and offset accounts that reduce your interest day by day.

Fixed vs variable: the key differences

• Rate certainty: Fixed wins — your repayments are locked in
• Flexibility: Variable wins — extra repayments, redraw, offset accounts
• Break costs: Fixed loans can charge thousands if you exit early; variable rarely do
• Offset accounts: Usually only available on variable rate loans
• Rate benefit if RBA cuts: Variable wins — you benefit automatically
• Protection if RBA hikes: Fixed wins — you're sheltered during the fixed period

The split loan option

Many borrowers choose a "split loan" — fixing a portion (e.g. 70%) for certainty while leaving the rest variable to benefit from flexibility. For example, you might fix $420,000 of a $600,000 loan, keeping $180,000 variable with an offset account attached. This hedges your exposure in both directions.

What does Fairbanks recommend right now?

As of March 2026, with rates having stabilised after several years of volatility, many of our clients are opting for a 2-year fixed rate on 60–70% of their loan with the balance on variable. This captures rate certainty while preserving offset account benefits. Book a free call to discuss your specific situation.